Category Archives: Sliver Stocks

If You Liked Randgold Resources, You’ll Love This Junior Name (VGZ, GOLD, GLD)

A couple of days ago when gold and the SPDR Gold Trust ETF (NYSEARCA:GLD) were getting back into a bullish groove, I advocated Randgold Resources Ltd. ADR (NASDAQ:GOLD) as the better way to play gold’s rebound. GOLD had fought its way back above a key ceiling, and was poised to take off… much more so than GLD was. To tell you the truth though, Randgold Resources Ltd. wasn’t actually my first choice. The gold mining name I wanted to suggest was a little smaller – Vista Gold Corp. (NYSEMKT:VGZ). In the meantime, VGZ has forged out enough of the bullish progress I saw brewing then to merit a mention now.

With a market cap of only $88 million, VGZ isn’t exactly capable of commanding the same kind of attention that $7.5 billion GOLD can. The fact that Vista Gold isn’t actually producing gold isn’t helping either. But, for those who know the difference between a ‘trade’ and an ‘investment’ (Randgold Resources Ltd. is an investment, while Vista Gold Corp. is a trade), there’s some serious opportunity with Vista as of today.

It’s all in the chart. Last week, VGZ broke above a key falling resistance line (red); what you can’t see is how that line tagged the peak from September of last year. This week, Vista Gold Corp. shares broke above their 50-day moving average line (purple). Both are multi-month firsts, which in itself is an indication of a paradigm shift. But, to see them at the same time signals a major turning of the tide. After nearly eleven months of bearish pressure though, this small bullish nudge could simply be the first step in a much bigger rally.

There’s more to the budding rally than just a technical catalyst though. Gold prices themselves are on the rise, and that – philosophically anyway – makes gold mining names like Randgold Resources and Vista Gold more profitable. The costs to mine the stuff are fixed, but the price at which it’s sold is variable. Margins widen considerably even with just the slightest uptick in gold prices. In all actuality, this is irrelevant for VGZ, since it’s not producing gold yet. The power of association and potential is a strong one when it comes to stocks, however, so this little company is most definitely on the right side of the trend.

As for how long/far Vista Gold could rally, that’s still a function of gold prices; how long/far can GLD rally? The projection I made for gold on Wednesday still stands. Translating that into a firm target for SPDR Gold Trust ETF, the fund should reach the $143 area before hitting any major walls. That’ll also be when GOLD and VGZ start to struggle. Should be a great ride between here and there though.

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At the Open: Stocks Fall on U.S. Political, Economic Uncertainty

Stocks have opened mixed this morning as the hangover from last week’s Federal Reserve meeting lingers.

The S&P 500 has dropped 0.3% to 1,705.27, the Dow Jones Industrials have fallen 0.1% to 15,439.53 and the Nasdaq Composite has declined 0.1% to 3,769.70.

It’s not that there wasn’t any good news over the weekend. China’s “flash” manufacturing purchasing manages’ index rose to a six-month high, Angela Merkel won a third term as Germany’s chancellor and

Yet everything in the U.S. is as messy as ever. The Fed shocked investors last week when it didn’t taper but it also didn’t say that it wouldn’t start scaling back its bond purchases in the months ahead; the U.S. looks to be headed for a government shutdown after the House sent a budget that defunds the Patient Protection and Affordable Care Act; and we still don’t know who will replace Ben Bernanke as head of the Fed. And then there’s the debt ceiling, which needs to be raised again.

No wonder investors are feeling less than excited this morning.

Citigroup (C) has dropped 2.5% to $49.92 this morning after the Financial Times reported it had experienced a big drop in trading revenue.

Rockwell Collins (COL) has fallen 2.6% to $68.21 after it was downgraded to Neutral from Outperform at Credit Suisse.

General Electric (GE) has gained 1% to $24.25 after signing a bunch of deals and getting a positive mention from my colleague Jack Hough in this weekend’s Barron’s.

Nielsen (NV) has gained 1.8% to $36.51 after its deal to buy Arbitron was approved with some changes required.