Seabridge on Sale and on Support
Here in late August 2016 I believe the market is presenting us with a bow wrapped gift in the gold mining sector selloff, in particular in shares of Seabridge Gold (SA/SEA.TO). Seabridge is currently one of the most oversold gold miners in the sector, as it closed today right on its 200 day moving average (DMA). GDXJ as a proxy for the junior sector, closed just below its 50 day moving average (about $47) versus its 200 DMA, which is all the way down near $31.50. SA has had no bad news or financings announced to merit such a drastic variance from the sector. My guess is mainly that it is usually more volatile than the sector, which swings wildly in its own right.
Many of you know my bullish stance on gold and mining stocks and that I believe this new bull cycle just began early this year. After an entire sector triples in 7 months, guess what? Yes, it is due for a breather and even a jolting shake out to flush the Johnny come lately types out before any fresh highs can materialize. We all knew it was coming at some point, and there will be plenty more in the future. The fact is that SA is presenting an excellent extra point right now around/under $11 per share as it is already oversold and sitting right at very strong support levels. I anticipate the bounce to be fairly fierce in percentage terms so this can be traded, yet I am planning on holding a large position long term, for much higher prices.
Once the gold bull kicks into real gear and institutional investors can no longer stay out entirely, I think SA will be a hedge fun darling stock of sorts. The draw mainly being the massive gold in the ground assets the company owns spread over 3 very large projects, all in Canada. This relatively unknown gold company has over 45 Million ounces of proven and probable gold reserves, making it one of the top ten gold companies in the world in terms of reserves size Unfortunately in this brief report, I am not going to dive deeply into a fundamental analysis on Seabridge. The reason is that I think the biggest value in putting this piece out this morning quickly, is the timing, and the window will likely shut to buy SA shares near/under $11 swiftly.
However, I would strongly encourage you to look through the company’s corporate presentation, which lays out the value proposition nicely. In addition, I have linked 2 very recent articles featuring interviews with CEO Rudi Frank which, after reading, you’ll see that this is an exceptional story/situation in the gold sector. Insiders own over 30%, the reserves are enormous, low market cap, and I can go on and on. But most importantly today, let’s go to the charts!
On the daily chart above, clearly the share price is right on/below its 200 DMA, which will act as very strong support and a springboard. Even if the share price flushes to $10 today/tomorrow, the $11 area will then act as a magnet. Also note the RSI on top (circled) which shows a 26 reading as of yesterdays close. This isn’t all that extreme, but considering we’ve seen a 25% plus decline in value in 4 straight trading days, the drop is significantly worse than the sector at large, and when sitting right on major support, it is plenty to justify a strong bounce. But, let’s take a step back and check out the weekly chart….
A picture is worth a thousand words. Hello?? Maybe I’m wrong, but I’m not afraid to call out exactly at the time that I think the market is presenting us with a brief window to buy shares before a fresh move higher. The weekly trend line is very nicely still intact (if the share price melts below this week and next, it would obviously negate this trend). But as of now, near these prices, giving room for a bear trap flush to even $10, as long as we close out the week around $11, the longer term trend is looking lovely. Three chances to buy the intermediate lows on SA/SEA in the past year and I’m saying this is one of them today.
The fact is that even if I’m dead wrong, this is the type of setup and circumstance you want to see to enter a position, or buy more stock. I almost tripled the size of my position on Wednesday, mostly adding at $11 give or take 10-20 cents. I’m now overloaded in Seabridge and it’s one of my largest single holdings. I plan on lightening that up on a bounce to $13 or so, socking away a nice and potentially quick 15-20% profit in hours/days, maybe a couple of weeks. Then I’ll keep a nice large position on for much higher prices.
I can make a case for $50 a share on SA in 24-36 months or sooner and that is actually where I think the stock is going as gold retests its 2011 highs in that timeframe, or sooner. Seabridge will ultimately be a $50-$100 per share stock if they aren’t bought out along the way….watch and see! That will take plenty of time but right now Seabridge and the gold miners are presenting a very compelling risk/reward entry point for traders and investors and I would encourage readers to accumulate today around $11 and the closer to $10 it goes today/tomorrow, if it does, the more aggressive I would be in buying. You can check out the CEO interviews I reference here:
http://sprottglobal.com/thoughts/articles/seabridge-building-out-an-optionality-company/http://www.theaureport.com/pub/na/seabridge-is-turning-cash-into-gold
I’m long shares in Seabridge Gold and may buy more or sell my entire position without any notice.For updates on Seabridge Gold and unique ideas on individual mining stocks, please sign up for our free newsletter below.