Time to Add a Gold Stock – But Which One?

It's getting time to add a gold stock to the Seasonal Forecaster portfolio. But which one?

With gold having been in a 3-year bear market, I'm not likely to select a stock based on fundamentals. No, this is going to be based primarily on charts.  It's the strength in the gold sector, relative to the overall market, that is offering up a potential turnaround situation.

Gold tends to move in longer-term trends. Identifying a change in the major trend is the key to successful investing in this sector.

The difficulty, once a change in the trend is identified, is in picking the best trade candidate(s). I have a few gold stock candidates I'm researching, aiming to pick one to add to the newsletter portfolio. Now I just have to narrow down the list.

I am down to several stocks and all of them have similar charts – a good rally since the start of this year followed by recent consolidation. So it's time to apply one more filtering technique, to try and raise the odds of success of this trade as high as possible.

The name of the newsletter provides the answer – I will look at the seasonal patterns of each trade candidate.

Looking at trade candidate #1, I see that this gold stock has lost an average of 3.8% over the next 6 weeks. Out of the past 22 years, 14 have been losses, and several of them were double-digit losses:

I might give recent years more emphasis, but even then, this stock has had some large losses as well as gains.

I then look at another trade candidate, again with a similar chart, and see the following seasonal pattern. Six weeks out it has averaged a 4.0% gain, with 9 out of 13 gains (62% Win/Total ratio). But if I focus on the 13 week timeframe, it gets even better.

This stock has averaged a 14.4% gain over the next 13 weeks, with gains in 11 out of 13 years, an 85% success rate:

This second chart tells me that whatever the reasons are, this particular stock is more likely to be the focus of institutional buying over the near term than the first stock. What attracted them to this stock in the past may bring them back again this year.

In today's newsletter I look at whether a higher probability trade setup exists right now for trade entry, and if not, what I will be looking for. But I have my trade candidate, and seasonal analysis helped me narrow down the choices.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

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Gregg Harris is the Chief Technical Strategist at MarketTamer.com.

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