RHODIUM TRADING THOUGHTS
by Ned W. Schmidt, CFA, CEBS
Schmidt Management Company
May 26, 2010
Rhodium Trading Thoughts is about timely and profitable trading of precious metals. We do not believe every turn in the market can be called. Our goal is that our recommendations should be profitable. Profits are the goals, not trades. Do not expect all recommendations to be profitable. No system can achieve that lofty goal. Our goal is simply to state whether conditions for a metal are favorable or not. Buy signals are issued when appropriate. These signals are generally speaking for day they are issued. If price remains below signal price, buying can be done. Do Not Buy signals are given when market is over bought, and buying is unwise. Blue triangles indicate an over bought condition. These would not be good times to buy, so they are labeled Do Not Buy. Software is not showing complete legend, for some reason.
Continuing with our view that two heads are better than one, we are using two methods to attempt to identify undervalued prices for Rhodium. In the top chart is the price of $Rhodium along with a traditional stochastic oscillator. $Rhodium is over sold when that measure is below 20%. Such is the case at the present time as most interest in the metals is in Gold.
In the second chart is the ratio of the price of $Rhodium(Rh) to that of $Gold(Au). The two lines are the mean of that ratio plus or minus one standard deviation. For example, probability of ratio being below the bottom line is 1 out of 6. In short, the ratio should rarely be below that line. The same is true for the ratio being below the bottom line. Given the highly speculative nature of $Gold trading at the present time, Rh is under priced relative to $Gold.
We have marked with vertical arrows the three times that both methods were suggesting that $Rhodium was under valued. At the present time $Rhodium seems the better value when compared to $Gold.
In the table below we have introduced our preliminary estimates of value for $Rhodium. Please recognize that these are our first valuations, and are subject to change at a later date. We will try to bracket the true value over time.
Again, note that this research effort is in infancy. Where we go will be in part determined by the market and the interest of investors. We do believe that $Rh is undervalued.
|$Rh Preliminary Price Valuation Range|
|Rh Current||Valuation||$Valuation||Potential % Change|
© 2010 Ned W. Schmidt
GOLD THOUGHTS are from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report, monthly, and Trading Thoughts, weekly. For a subscription, click here.
Disclaimer: Please remember that no method is perfect nor is the one running the model. All estimated returns are for the model portfolio and do not reflect those earned on actual portfolios.