Having sidestepped considerable pain a while back by bailing out of some low-priced mining stocks that were bound even lower, we are obliged to reconsider them now that they’ve come to despond so close to the zero axis.  Canyon Resources and Durban Roodeport have both fallen to levels where I’d said they’d become attractive. Not that they were such bad values before at twice the price. But as long as bullion stocks remain out of favor we’ve got to be careful about buying even the dirt-cheap ones, for at least two reasons: 1) undervalued stocks have a way of becoming ridiculously undervalued; and 2) our investment capital should always be working, not waiting; but certainly not shrinking, in any event.

So what about Canyon and DROOY?  We jettisoned half of our shares in the latter at 1.48 in early February, just days after having bought in at 1.21, a hidden pivot from which the stock trampolined. Applying the gain to the remainder of our position gave us a cost basis of 0.94, but when DROOY subsequently appeared in danger of falling to as low as 0.80, we took the money and ran. With some difficulty the stock has managed to stay above 0.78 since then but now looks to be staging for a dive to new multiyear lows.

(Click on chart to enlarge)

The good news is that, technically speaking, there is evidence to suggest DROOY is not on its way to the grave. There is in fact a promising hidden-pivot support not far below current levels, and you can take advantage of it by bidding as I’ve detailed in today’s advisory, using a stop-loss as tight as four cents. This trade is ideal for anyone looking to leverage a possible turnaround in the mining stocks without risking the farm. Regarding Canyon Resources, we jumped to safety at 0.79 a short while back, intending to re-enter if the stock fell to 65 cents. It’s there now, having traded as low as 67 cents earlier this week, so it’s time to do some nibbling -- also with a very tight stop loss. Bidding instructions appear in the Current Touts section of Rick’s Picks.