Earlier this week I caught up with @Goldfinger, who is a regular contributor on ceo.ca. He is a 15 year veteran trader & portfolio manager, focused on commodities, junior resource stocks, and technical analysis.
We talked about Gold, Silver, Bitcoin, and what he looks for when investing in the resource space.
Welcome back to The Next Bull Market Move Goldfinger. When you were on the show in January we talked about Gold and you provided a chart giving some us some resistance points that Gold would need to break through to go to 1400 and above (see below).
As we speak we are still consolidating in the 1300 range, so do you feel the longer this range consolidates, the further and faster it will climb once it breaks this range?
Gold has been in a bottoming process for more than five years now (since the April 2013 gold crash) and there have been some positive signs recently as dips have become increasingly shallow and resistance near $1370 has been tested multiple times.
The more times a level is tested the more likely it is to eventually break, so if gold gets back up near $1370 again over the next few months I think there will be a very good chance that we will see $1400s printing very soon thereafter.
To answer the question about the range-bound consolidation, yes, the longer a market chops within a range generally the more energy it builds up for the ensuing breakout/breakdown.
Gold has formed an ascending triangle during the last couple of years and price has been coiling in an increasingly narrow range as we move closer to the apex of this triangle:
I’m fine with going on record that we will get a major resolution to this chart pattern in the next 2-3 months, and hopefully it will be an upside resolution. I believe the odds favor an upside breakout, however, we don’t want to see gold fall back below $1275. If gold does fall below $1275 it could be in trouble and on its way down to the low $1100s.
How do feel about Silver at the moment? The feeling I get is most investors have given up on it and believe it will be forever range bound.
Silver is a tricky one. It seems like it’s the serial heartbreaker metal. It won’t be range-bound forever, however, I would be a lot more bullish if all the silver bloggers stopped talking about this “imminent short squeeze” they’ve been banging the table on for the last decade. Silver should follow gold here in the next few months, so if gold breaks out to the upside we will see silver back above $20 again.
How do you pick a resource company to invest in? Do you rely on a combination of management and technicals to find value and good entry points? How important is management?
That’s a tricky question. You used the word “invest” in your question so I will stick to investing as opposed to trading (shorter term). In the junior resource sector the management team is probably the #1 most important thing to look at in a company. Terrible management teams can ruin the best projects, and it’s happened time and time again in this sector.
You want to invest alongside management teams that have a high level of integrity, as well as a track record of success. One should ask themselves the questions “Is this management running this company to maximize shareholder value?” - if the answer to that question is anything less than a resounding YES then you’ve got a problem and most likely do not want to be a shareholder of that company.
Of course the quality of the company’s project(s) is also very important, however, as I said without a great management team the odds are usually against shareholders in the resource sector. Even the best projects can be ruined by companies that mismanage resources and end up diluting shareholders into oblivion.
Share structure is crucial and something that all junior resource investors should analyze before buying shares in a company. In addition, it’s important to understand who the largest shareholders are and what their interests are - where are they incentivized? How many shares does management own? At what price did management get their shares? Have they been buying on the open market? All important questions that help to understand the bigger picture in any junior.
Technical analysis comes into play by helping to identify attractive entry points and managing risk. I also generally want to invest in stocks that are in a longer term uptrend and the chart obviously helps to see that.
Another way that technical analysis can help us as long term investors in the junior resource sector is to dig deeper and ask better questions when there is a clear divergence between the ‘fundamental story’ and the technical price action.
When everything sounds great and management is very bullish, yet the price action is telling us a different story it’s generally a sign that we’re missing a piece of the picture.
If the technicals are solid then I am prompted to dig deeper and understand the fundamental story, however, if the technicals are poor I would have to have a much higher degree of conviction that I understand something about the fundamental story that the “market” is missing.
Let’s talk about Bitcoin. Are we in a dead cat bounce situation or do you believe that we are still in the early stages of a bull market for Bitcoin and the rest of the cryptocurrencies? My own feeling is that the coins that have already raised money in the last year and have a working product that solves real world problems for certain sectors (gaming/gambling/banking) will take the lead. Your thoughts?
I believe that cryptocurrencies are undergoing a weeding out process as a sector and that we will see an increasingly large gap between the winners (Bitcoin, Ethereum, Monero etc.) and the rest of the herd (the losers).
We are also seeing this process take place in the equity market, as all the “me too” companies that started trading after HIVE, at the end of 2017 or the beginning of 2018, have seen large price declines virtually across the board. Gimmicks and scams aren’t going to attract capital anymore in this sector.
As you pointed out investors are only going to allocate capital to companies/coins that solve real world problems effectively and efficiently.
In some ways HIVE was a victim of its own success because its astronomic climb during its first couple of months of trading set the bar so incredibly high that there was almost no way it could jump over it.
I think we’ve seen a major reset in expectations and if you’re bullish on ethereum and the other leading cryptocurrencies now is actually a pretty good time to invest in HIVE shares (C$1.30 share price).
And finally, tell us about your trading service and how readers can get in touch with you?
The Trading Lab is something I launched in early 2016 as a premium service to help traders/investors navigate markets on a daily basis. It has grown to now having over 60 subscribers and we regularly have conversations going on in the Trading Lab chat channel on CEO.ca with more than a dozen subscribers conversing and sharing ideas in real time during market hours.
The service is comprised of a few components: A daily morning market email each weekday morning to help subscribers get ideas/insights for the day ahead, a junior resource model portfolio, weekend charting videos in which I go over the most important charts and share my longer term views, and finally the Trading Lab private channel on CEO.ca where I share all my trades in real time with stop losses/target levels/analysis.
@SASKEXPRESS recently blogged about his experience using the Trading Lab and I think he did a great job.
Thank you Kerem, I appreciate you taking the time to interview me and you asked some excellent questions.
Many thanks Goldfinger.
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Disclaimer - Interviews are conducted in the name of research and learning from the best. Only you can decide what makes a good speculation/investment.