Chalice completes a reversion to the mean

There is a preface within my latest newsletter ‘Warming To Commodities’, that I have been a bearish on commodities and their related stocks for the past 2 years.

2 years ago, I wrote this note about Australian mining company, Chalice Mining (CHN:ASX) and it was an example of my bearish views.

Following that near-term August 2021 timeframe, the stock price danced between both ends of its ‘extreme pendulum’.

This week, Chalice Mining’s stock price finally mean reverted back to (and below) its 200 week moving average. This satisfies my criteria of an ‘oversold’ extreme where it’s also oversold on a weekly basis and trading 2.5 standard deviations below its weekly mean.

Whilst the downward price trend is strong suggesting further weakness (and there are gaps way below), the lesson is more about observing where the upper end of the ‘extremes’ range was and how the ‘mean’ rolls and morphs over time.

For example, back in August 2021, the 200 week moving average for Chalice sat at $1.49……now that mean is at $4.82.

Now, it’ll be important to watch if the stock price holds $3.37, which was its June 2022 trough.

Interestingly, nearly 15% of the company’s shares outstanding have been traded in the past 4 weeks of weakness.

Providing that ‘nothing is broken’, this is also an example where ‘weaker hands’ are throwing their stock away, into the hands of ‘stronger hands’.

August 31, 2023

by Rob Zdravevski

rob@karriasset.com.au