Miners followed gold
Most mining companies reversed their 2015 losses during the first few months of 2016, posting substantial gains. The correlation between mining stocks and gold remains high. Most miners surged following the gains in gold. Friday was important. Gold rose to a two-year high due to additional haven bids on the Brexit referendum. Almost all mining stocks rose on Friday.
The VanEck Vectors Gold Miners ETF (GDX) has risen 94.7% YTD. Due to the sudden substantial increases in mining stocks, many were trading close to or above their target prices. However, many miners are still below their target prices. The above four miners are trading substantially above their target prices, which suggests a possible downturn. All the four stocks saw huge gains due to the Brexit vote.
First Majestic, Agnico Eagle, Yamana Gold, and Coeur Mining are trading at massive premiums of 59.6%, 26.7%, 34.6%, and 58.8%, respectively, to their 100-day moving averages. A massive premium over a trading price suggests a possible drop in price.
The RSI (relative strength index) readings for these four miners and most other miners have fallen considerably due to gold’s price drop. An RSI level above 70 indicates that a stock has been overbought and could fall. An RSI level below 30 indicates that a stock has been oversold and could rise. GDX’s RSI is close to 61.
EQT (EQT) had the lowest implied volatility among all upstream stocks as of June 24, 2016.
Coca-Cola (KO) impressed investors with better-than-expected revenue and earnings for the first quarter.
Microsoft (MSFT) announced this month that it had acquired a San Diego startup called Express Logic for an undisclosed amount.
Spirit Airlines is scheduled to report its first-quarter results on April 25. The airline has an impressive record of beating earnings estimates.
On April 23 before the market opened, legacy motorcycle maker Harley-Davidson (HOG) reported its first-quarter earnings results.
Williams Companies (WMB) is scheduled to release its first-quarter earnings on May 1 after the market closes.
McDonald’s (MCD) is set to report its first-quarter earnings before the market opens on April 30.