Originally published by Chamber of Merchants
Friday’s 32k drawdown turned into only a 17k drawdown today, due to the expected bounce in gold price.
My portfolio is roughly 20% Ramelius Resources Ltd (AX:RMS). My entry price was around 50.5c so currently the drawdown has placed me in a negative trade on this one. I am not making recommendations for stocks. That’s not what we do here. Many sites will recommend stocks, pump them, and dump them as you buy them. I already own RMS and currently have a drawdown of roughly 12k AUD.
Due to its hedging of Gold sales, RMS has not been treated as poorly as other miners during the past few weeks. I expect RMS to be an outperformer as we reach nearer to their higher production numbers. A portion of that additional gold production will not be hedged which is a good thing, especially if the Gold price crosses $1370+ as I expect in the next few weeks. $1370+ ?! Joking right? No. Not joking. Read the last weekend report.
Below is the chart for RMS.AX:
RMS. AX Ramelius Resources Chart
As you can see, RMS generally trades in tight price range boxes. It failed to hold the box above 50c due to gold being oversold as well as a credit raise that created more liquidity in the float. Within a few weeks, I expect RMS to trade in the empty box.
Also, as I expected, RMS announced today that :
“Ramelius Resources Limited (ASX:RMS) is pleased to announce record gold production and exceeded Guidance for the September 2016 Quarter with 36,179 ounces of gold produced from the Company’s operations in Western Australia.”
Also:
“Given that gold production exceeded the Guidance range, the unit costs (AISC/oz) are expected to be significantly lower than Guidance of A$1,100/oz (US$825/oz) “
Conclusions
I tried to get as close to the bottom as possible on RMS, but it’s not possible to always pick the bottom. 50.5c was my entry and I have not set a stop, since this is the level I would buy if I were cash. I can sleep at night, because as a Merchant, I acquired this commodity producer at a price which was at the lower end of the trading channel. Additionally, most of this action is based on low volume days and I believe that an accumulation has been occurring for quite some time at the lowest possible average price. When I purchased RMS I did so with the expectation that production was going to increase into the next quarter, which is clearly happening given today’s announcement. I have no trading intentions on RMS for a while yet, but when I do I will publish my intended exit at that time. At that stage, prior to year’s end ,I expect RMS to be trading 60c+ which should produce a profit of roughly 15k AUD to 25k AUD. based on a holding of 150,000 shares and based on the quality and timing of my exit.
Also, a message forwarded to my phone from the Patron this morning:
“Your CMC Markets Stockbroking account is now open & available on our trading platform.” – Good for him.
Chin up, with every day of learning you’re one step closer to being more profitable.
See you around the ASX.