Captain Yamana

As gold stocks were bottoming into the painful and emotional correction of mid-August, I held large miners such as Goldcorp (GG) and Gold Fields (GFI) in the actively managed account occasionally noted on the blog. These leading gold producers are still held long term in accounts I manage for others, but during the strong rebound of late summer and early autumn, I have released most of my well known producers in favor of adding to core holdings of junior producers, near producers and explorers. The exception is Yamana Gold (AUY). I call him Captain Yamana because he is the lone well known producer in the portfolio overseeing the underlings. The Captain is richly valued, but with its strong management reputation and aggressive strategy, there is room for such a stock among my value and deep value lottery tickets... that is to say juniors and exploration companies.

With its acquisition strategy (I first took serious note of AUY after they gobbled up my former favorite miner, Desert Sun - a fledgling South American Producer). My particular strengths are in technical analysis and macro-fundamentals (watch the TA Blog & Commentary Blog for ongoing analysis of Gold-Silver ratios, Gold-Oil ratios and Dow-Gold ratios and many other macro signposts). I have neither the interest nor the time to bore too deeply into the micro-fundamentals of individual companies, but here is a rather entertaining look at the AUY-NTO-MDG courtship from biiwii.com friend Mark Turner, Latin American equities analyst with Hallgarten & Company. Again, AUY is a good company and getting better. It is up to the reader to make 'value' decisions.

But on to the techicals where I am most comfortable:

The daily chart shows what could be a nice inverted head & shoulders set up in making. This stock has gotten out of step with the sector largely because of its (in)digestion of Meridian and Northern Orion. I like the way AUY has broken the daily (and weekly) down trend and held above the blue line. This keeps the H&S in play. PPO and MACD have long since taken pure traders out of the stock and the up trend is weakening. But this consolidation is happening on declining volume and in fact 'on balance' volume remains very positive. This is one premium miner that is not over bought and that is not a statement that can be made for many of the major gold stocks.

I plan to follow the progress of the 'potential' H&S and monitor momentum indicators like the RSI & PPO and if the neck line is exceeded on a closing basis, the target becomes 17 plus. Meanwhile, AUY will continue to deal with support near the 50 day moving average and resistance near the 200 dma. I am not trying to make a prediction as AUY will ultimately be subject to the direction of the sector in the short term. But the chart currently looks very interesting.

Edit (4:29) Today helped further define the potential 2nd shoulder.
Edit (10/10 @ 12:23) Looking better yet. Reminder: Inverted H&S not confirmed until solid close and hold above neck line.

I am long AUY.

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