What I have learned in 25 years of trading mining stocks:
Silver stocks have always been my first love as silver can do anythng gold can do and will always follow it, plus it is an industrial metal which I beleive is in short supply!
In a bull market like this, there are specific ways in which people invest.
The majors go first and the big money stays pretty much with the majors. Which is why I like buying options on majors coming out of a bear market, they are often very cheap.
Secondly, I look for volume. No volume no purchase! Now besides the majors when the little guy starts moving in they want producers too, but they will buy juniors.
Two perfect examples are ECU and EXN (both silver with zinc). They are small producers. The area where they have there mines has extrememly rich ore, large district, but small veins and highly faulted. But in a market like this they often do well and sometimes find larger deposits.
The little guy buys these kinds of plays. If you look at their charts you will see large volume and a steady upward chart. There are also very few pure silver deposits in the world so being the type of junior they are they will become overvalued, which is fine if you buy low and sell high-grin.
In previous bull markets these types of plays often will go to between $5 and $10 depending of course how high silver goes. If silver were to go to say $20 they would surly go to those prices, $30 silver even more.
I also like juniors producers doing a lot of exploration. Best of both worlds. True of both companies above.
So in the early stages (we are exiting stage 1 IMO) I buy no stocks without volume and no exploration stocks except in very unusual situaltions. I almost bought kre knowing how rich that area is.
I also trade a lot. For instance when one becomes familiar with stocks they can see when they get over valued and undervalued. If a tier 4 stock jumps up in price to tier 3 stock I will trade across for a true teir 3 stock and likewise if a teir 3 stock drops in place to a teir 4 price I will sell one of my teir and buy the teir 3.
Also, the perfect trader will move from senior producer companies, to junior producer companies, to companies with depositis and then good exploration and then goat pasture near producing metals districs.
Sort of like class in horse racing. I usually play the oldest horse in a long race because they know how to pace themselves and on a good day when their arthritus is not plaguing them they can wax any horse in the race-lol.
Know what class a mining stock is in.
I am always looking for value, missed by the market. These markets are not all wise!! As I have mentioned, SLW B wts just came on the market a few weeks ago. On the first day one could have bought all they wanted for $1 all day long. Today they are worth almost $4.
This was a matter of people not knowing how to handicapp them. They did not anticipate their value in relation to this market! It has been almost 20 years since the last small bull market and 26 years since the last real bull market.
Few people have any idea how to value mining stocks and guess where they are going. Only a few old people still alive, who were paying attention, can remember the 1980 bull market.
That ride made people crazy. This time could be even crazier becasue the whole world is involved and they know less than most of us. And there are real shortages this time and real fear. Neither of which will go away in my opinion.
Producers eventually will become fully valued and stop when metals stop. At that point the pros move out of the producers and into exploration stocks.
Good luck to everyone. |
