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12/17/08

Charts of the day are...........

......three charts that compare Southern Copper (PCU), Freeport McMoRan (FCX) and the Philadelphia Gold and Silver Sector Index(XAU). First here's the ten day chart, and the recovery in all three is clearly marked.

Then we have this one that shows the 12 month evolution. This one suggests that FCX is the place to be as it's the most beaten up of the three.

You'd have thought that FCX, with its copper-plus-gold product mix, would have survived the last few months better than the heavily copper (and moly, with some minor credits) PCU, but that ain't necessarily so, Joe.

Finally the long five year view. This one shows that owning gold stocks from late 2003 to late 2008 has been (dare I say this out loud?) a zero sum game.

It also shows just how high PCU flew after it had been discovered by the market.

So what's the bottom line here? Well draw your own conclusions, but I think there are several things to take away from this chart study. Here are just four of them:
  • PCU compared to the others on the long term chart shows the value in picking good stocks at the right time. It also shows how even the best can fall back if the underlying market sucks.
  • The one year chart shows how gold stocks have held up better than base metals stocks. This stands to reason and is part of the 'preservation of capital' drum I've beaten ever since this blog started in March.
  • The 10 day chart shows that the breath of life is being blown into all miners, not just the goldies.
  • But maybe the most important thing to note is how you can favour XAU, then PCU, then FCX just by changing the timescale of your chart. A great example of the biggest trap in charting. This is the thing that puts me off blowhards that say charts are the way the truth and the light. Charts are like statistics; if desired, you can pick and choose the one you want to make your preconceived point. The charts don't lie, but the people who write words around them certainly do. This is why I call TA (mostly) mumbojumbo and this is why a good chart-reader is as skilled as a good fundamental analyst (and also just as rare).