I keep hearing how gold stocks are overvalued, HMY?

[Scorpio]

Granted, Harmony is a SA company, and the Rand has had a distinct impact on profitability.

But, from the enclosed charts, you can see that with gold at last winters' highs, Harmony is a long way from its' top set at that time. Room for upside yet? I guess it depends on which stock you are discussing and the past.

From the daily, you can see a gap below 14.00 that has not closed. The gap later on at 14.75 has closed. Does the gap at 13.75 +- become a breakaway gap or are we destined to go back and put a little closure there? Near term this thing has been a money printer.

Further quantification for the sell into strength school of thought. From the weekly, the tops last winter were about 19.00 with a collapse from there to solid support at 10.00. Even then, the buy and holders, maintaining patience and forgetting about it, are fine over a short 6 mos period as it climbs back.
So there is rational, to hold and hold in a bull market, not worrying about medium term activity. Point being, is both methods work, being out is the sin in a roaring bull market.

401K's forced many into a 'savings' plan. Not having market intelligence or savvy, the funds were taken from their paychecks weekly, and dumped into the roaring bull market in SM's. Anybody can win in a bull market if they are in.

The real pressure is exerted when it is time to pick up your chips and go home.
How many go to the casino, play a little blackjack, get a few chips, then proceed to think they are on some monumental roll, thereby cashing them all in and leaving with nothing, or worse, losers. Hmmmmmmmm. Kinda the same that has been happening in stocks huh?

Anyway, here are the Harmony charts. Note the declining volume since the highs were established in May of '02. The highs were hit followed by a violent decline to the 10's only to rise like a phoenix once again to top out early this year in the 18's, to once again get pummeled. Until the highs are taken out, you have to pay attention to this.

Here you go.

[Scorpio]

Now let's look at a Canadian Miner that we all feel is as solid a company as one can find. Goldcorp.

You can see from the daily that it continues to be a laborious battle. Nowhere near the volatility exhibited in the SA golds. Just a continuous struggle to reach ever higher levels. Currently working on new highs.

From the weekly, there never was the grand top in '02 like HMY followed by the sharp decline of 45%. A solid top was established in '02 followed by a decent correction, on to a higher top in early '03, and now working to new highs.

Bull market in action. In this case, you have to be more reactive if you are farming it because the volatility in this stock is not as great as HMY. Pays to choose your playground. I have used HMY both short and long over the past couple of years. With Goldcorp, I have chosen to let it ride.

Goldcorp is currently working to stretch its' upper limits once again as is warranted of a very good gold company. This one is not as exciting as an SA, yet this one will reward you long term without you ever having to do a thing, except pay attention for an end.

Note too, the volume has been declining since early this year with the Iraq news. Watch for a significant volume rise in gold stocks.