Hecla Mining (NYSE: HL) is a precious metals mining company that mines gold and silver, along with other metals. The company was founded in 1983 and is based in Coeur d’Alene, Idaho. The company’s stock has done tremendously well over the past month, increasing from $5.42 to $6.42, an 18.5% increase. The company’s stock is grabbing attention, but not for the increase in its stock price, but for the gaps, the stock is experiencing. What are gaps and why are they important? Here’s why.
On a stock graph, gaps are the spaces on the chart that appear when the price of the stock changes significantly, with almost no in-between. Gaps typically occur surprisingly due to the supposed value of the investment based on technical or fundamental factors, which is exactly what the stock of Hecla Mining has experienced in the past few days.
The company’s stock price closed Tuesday at $6.13 but automatically started trading at $6.38(gapped up) the next day. At the end of Wednesday, the stock was at $6.13 again but also gapped the next day, jumping to $6.42 and remaining at around that price point since then. An interesting point to note in the stock is that the price never reaches the price between $6.16 and $6.22 ranges.
Below: A graph of Hecla Mining’s stock price from November 8 to November 12, showing the two gaps, indicated by the sudden increase in stock price.
Gaps typically happen when there is a sudden change in the volume of shares trading, which in this case, is a sudden increase in shares being purchased. It can happen for many reasons, such as perceived value or an increased value in the commodities that the company mines. In the case of Hecla Mining, there is a particular reason as to why the gaps have happened.
One of the biggest aspects of the company is the mining of gold and represents a significant portion of their revenue. During the same time the stock has gapped, the price of gold increased drastically. As the value of gold increases, so does the value of the company and its share price. The increase in the trading volume also corresponds to the increase in the price of gold, as more investors seek companies who mine gold.
Below: The price of gold during the week of November 8 to November 12 with a correlation between the price of the stock and the price of gold, courtesy of BullionVault.
