I wanted to take a look at the last 10 times gold was this oversold, and check out what kind of move up happened in what time frame. Let’s see what comes of this. The most important thing to understand is that none of this in the past is indicative of future performance, but it might give us an idea where this can go in what time frame….possibly?

I just used touches to the bottom of the RSI until a touch to the top of the RSI in the pink range. 30 to 70.

What I found was that my buy under 30 RSI gold with many options 3 month out may have been timed perfectly with the stars aligning. Wall street can take those smiles and turn them to tears in a heart beat, but take a look at what I found.

In reverse order….

  1. Mar 08 – May 31st 2021

Move: $232 over 60 days. 13.81%

Comment: Had a move up, retest, and then stair step up for 6 weeks. RSI at end signaled top of move. Well under 200dma when starting, moved up and over.

2. Nov 30th 2020 to Jan 5th 2021

Move: $195 over 24 days. (11.09%)

Comment: I remember this well and thought we were going back to $2000. Then ran back down. Strong move up

3. (The monster) Mar 20 to Aug 6th 2020

Move: $615 over 100 days. (42.16%)

Comment: This is what I’m hoping for this July…Basel 3 might add some fun

4. Aug 16th 2018 to Jan 3rd 2019

Move: $137.79 over 100 days. (11.88%)

Comment: not as impressive as the beast above, but still an 11% move.

4a. June 28th to Aug 16th 2018

Move: -$81 in 35 days (-6.56%)

Comment: Not every time RSI is this low did it go to the moon. This one came up a little, then went back down to about the same RSI, which is where we see number 4 start. Had you held this to a 70 RSI or higher, it would have bled into the above for a total of $6 move up in 135 days. This would have crushed you for 3 month options buying. Counting this as 4a because I probably would have continued to hold until 70 RSI.

6. May 10th to Sept 5th 2017

Move: $126 up in 84 days (10.42%)

Comment: there were two up moves in this with a retracement, but I’m counting touches to 30 and 70. I’m seeing some up moves that don’t quite get to 70 and some down moves that don’t quite touch 30. I think I’m seeing a lot of meat and potatoes at 35-65 RSI with moves. The outliers here are what I’m seeking

7. Dec 14th 2016 to Jan 17th 2017

Move: $92.27 in 21 days (8.2%)

Comment: quicker move of about $100. Nothing special, but had you sold AT the 70 RSI, you would have moved a bigger move up which went another $90.

8. Nov 17th 2015 to Feb 11th 2016

Move: $195 in 61 days (18.36%)

Comment: I added some more time on this to see that a sell signal was there at RSI 70, and while the move continued up, a draw back came to give you a nice buy signal sub RSI 35 to get you a good move up quickly.

9. July 21 to Aug 21 2015

Move: $98 in 24 days (9.18%)

Comment: relatively quick move. If you got out at 70 and waited for another buy signal at 30 you would have missed a big down move.

10. Nov 5th 2014 to Jan 5th 2015

Move: $168 in 55 days (14.85%)

Comment: once again, the top here, if you got out, you missed a big slide down

Analysis:

9 of the last 10 times that the RSI was that low it went to RSI 70, and in one case, it came up and went back down to RSI 30. In THAT case, had you held longer, it eventually went to RSI 70. For the sake of making numbers easy, I’m going to toss that negative number.

With this, you see that the avg move is $206 in about 2 months at about 15% avg move up.

IF we use just the average to look at this opportunity, we see a potential of:

$1973 by Sept 6th for a rise of about 15%.

The questions that might skew this would revolve around how much the monster move skewed the results? What about 6 of these or so that were in the bear market?

When you go back to the 2008 to 2011 time frame and highlight the amount of times you saw an RSI this low, you see….

On 3 buying opportunities. In fact, had you waited for RSI of 30 to buy, you might have lost out on most of the run. The solution here is to probably sell positions as you get higher in the RSI and buy as you get lower in the RSI. What you might consider is that if an RSI is THIS low, I might be “fully deployed” and if an RSI is at like 80, I might be out. Now, there’s tax reasons you probably wouldn’t sell all for capital gains and all…

But I would consider this to be useful when buying mining stock options, especially when to buy and sell those options. If you are buying options at below 30 RSI, you have a statistically good chance of seeing the RSI 70 within two months or so. The ones I just bought for GDX and WPM are 3 months out.

Sure, I may have downside risk ahead, but options are about probabilities. What it LOOKs like is with my buys when gold was below 30RSI that I may have done well.

What I would love to have is the last 50 or so of these done. Get me stats on that. Throw out some outliers. I didn’t throw out the outlier for the monster move just because it was offset with so many bear market moves.

Lastly – the red marks above showed good buy areas in the bull market, and these were all around 35ish. When you get a time where you get under 30 RSI shoved in your face, it might be an interesting time to look at options.