With a currently bullish outlook on precious metals and the mining sector, we’re particularly eager to hear from subscribers with fresh ideas. Here’s one from subscriber Tim Huizenga that came my way during yesterday’s real-time Q&A session:

“ASA is a closed end fund that invests in gold mining companies. At present, most of the positions are South African mines, which is a negative. However, shareholders are currently voting on a proxy to allow the fund to invest in more of a diversified manner (currently the fund cannot invest any more than 20% of the portfolio in gold mining companies outside of S. Africa).  I bring this fund up for the simple reason it has had a history of trading at a significant discount.  It currently is trading at more than a 13% discount from it's published NAV, which is in the bottom half of its discount range this year (-6.9% to -18%).

“I believe we should keep an eye on this one if the gold stocks are about to stage a robust rally. If we can pick-up these shares at a discount, it is like having leverage without having to pay for it or without having to worry about time decay.  In its history, it has traded at a premium relative to its NAV - the last being in early 2003.  If shareholders approve the proxy (a decision was expected on July 7), this could become even more attractive, although the discount could shrink as well.  Let me know what you think.”

ASA hit bottom in 1998 but its rally has been stalled for three years. The somewhat discouraging fact is that the peak of the stall  -- $48 in November 2003 – occurred just a tad shy of a 50.50 high made back in early 1996 whose breach would have created a powerfully bullish impulse leg on the long-term charts. As things stand, it looks as though the stock could remain in a consolidation range for the foreseeable future. We can nonetheless risk small change trying to get long on pullbacks to hidden-pivot supports, but I wouldn’t recommend a buy-and-hold from current levels. (The last such opportunity was in May, when ASA made an important low at 33.26, not far from a major hidden-pivot support at 32.89.) Looking at the near horizon, we might get a chance to bottom-fish a hidden-pivot support at 34.88, or alternatively a pullback from above highs near 39.35 recorded in early April.