Taming the Volatility in the Miners – Allied Nevada Gold vs Coeur D’Alene Mines Pairs Trade

The Miners have been all over the place lately. For weeks they lagged the metal and then looked to overtake it. But even within the miners there are greet differences. Some are looking to hit new highs while others are screaming shorts. This can be illustrated by looking at two of the junior junior gold miners, Allied Nevada Gold, $ANV. I posted individual charts of each on chart.ly this weekend with my thoughts. But look at the ratio chart below of $ANV against $CDE. It broke out above the

descending triangle Friday and is now heading higher. This can be played as a pairs trade to take advantage of the strength in $ANV and the relative weakness of $CDE.

Trade idea: Buy 10 $ANV and sell short 16 $CDE

The pattern break and move higher has resistance at 1.62 and then 1.67 before a target on the pattern break to 1.75. The pair has an Relative Strength Index (RSI) rising sharply and a Moving Average Convergence Divergence (MACD) indicator that has crossed positive, both supporting the trade and more upside. Using a ratio of 1.56 as a stop, this trade risks $9.79-10.04 to make $38.54-42.15 or a reward to risk ratio of 3.84:1.

If you like what you see sign up for more ideas and deeper analysis using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits feed and on chartly.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus
Dragonfly Caps Blog