gold equities - the breakout?

Hi All.

Over the last week I have been looking over a number of charts including those I featured in ‘Gold Equities – The Immediate Future’ from around a month or two ago. Again, a number of patterns are evident, although in some cases the pattern identified last time has morphed into a larger consolidation pattern.

I’ll start with the Exchange Traded Funds and the Index’s then move onto the Australian gold miners.


GLD: SPDR Gold Trust (ETF) 2 Year Chart $US


A noticeable flag pattern has formed. Volume confirms the pattern, with an increase on the price rise, a decrease during the consolidation and an increase on the break out of the pattern. The yellow trend line around currently $99 is an obvious first target. I can envisage price needing to have a rest once it reached the trend line before breaking out (if it was to do that), to allow momentum indicators to regroup.

If you were to calculate the target from the pattern, it works out to around $120 (approx US$1200). Targets are however the most unreliable part of Technical Analysis


GLD: SPDR Gold Trust (ETF) 6 Month Chart $US


A double bottom reversal pattern can be seen above in the yellow circles. The yellow arrow shows the candle that confirmed the pattern and reversal. The next day price tested then retreated from the down trend line before breaking though a few days later. Price has continued to trend upward at a measured pace accompanied by a gradual increase in volume.


GDX: Market Vectors/Gold Miners ETF 2 Year Chart $US


There is quite a bit happening in this chart. Firstly, yesterday’s action broke the yellow down trend line that has been in place for just over a year. Secondly, price broke the resistance (thick white line) at around $39. And it cleared both of them on enormous volume. There appears to be little resistance until $52 is reached, which is a move of exactly 33% from the breakout.

You could also make a case for an imperfect reverse head and shoulders (reversal) pattern with $39 being the neckline. Its just a question of labelling the right shoulder..


GDX: Market Vectors/Gold Miners ETF 6 Month Chart $US


A clear break to new (recent) highs is visible on the 6-month chart, accompanied by a near doubling of recent volume. A very bullish move confirmed by very bullish volume………


HUI: AMEX Gold Bugs Index 2 Year Chart


The HUI chart above closely resembles that of the GDX. A similar line of resistance has been broken @ ~ 360. However price has not yet cleared the yellow down trend line. Again there appears to be little resistance until the high point in July 08 @ approx 475 and the previous high price in March 08 @ around 515.


HUI: AMEX Gold Bugs Index 6 Month Chart


The 6-month HUI chart shows a possibly interesting development. Price has been contained within a rising trend channel for the years entirety. Yesterday however, price broke above the top of the trend channel and may now be set to find a higher trading range.


XGD: ASX Gold Index 1 Year Chart


As in a number of the previous charts shown above, the XGD has broken out above the down trend line that has been in place for the last 3 months. Although there is no volume data supplied for the index, we know that Newcrest Mining (NCM) and Lihir Gold (LGL) make up a large percentage of the index and both have seen noticeable increases in volume.


In all 7 of the above charts, price has broken through at least 1 level of major resistance. Individually this is bullish. Collectively its signals the possibility of a strong move. Of course we will have to see what unfolds, but all the pieces of the puzzle are in place.



Below are the charts of a number of Australian Gold miners, developers & explorers:

AND


Six sessions ago, AND respected the trend line for the 4th time, before moving higher, breaking above the trend line resistance that has contained price for 2 months and breaking to a new high for the move. Today’s move to new recent highs was accompanied by the fourth highest volume in the last six months.


CAH


It appears that a descending triangle is forming for CAH. Support is @ 7 cents and given the volume that has been traded in the last week it is feasible that a break above the down trend line may eventuate shortly.


CNT


The CNT chart shows a classic triple bottom reversal pattern at the lows. Price has since stayed above the valid trend line. Over the past few sessions, price has broken out of the pattern to new highs on a strong announcement. The advance, on the largest turnover since 2006, halted exactly at the early 2008 highs which aren’t shown in the above chart.


IGR


Break of descending triangle led to a 50% increase in a matter of days. Huge volume increase suggests prices will be well supported going forward. Currently consolidating the recent gains. Every chance price could break upwards again in the near future.


KCN 4 Year Chart


Enlarging the timeframe can work wonders sometimes. Unnoticeable on the 6 month KCN chart is the line of resistance that has contained the price for 3 years. Two days ago the yellow up trend line was respected with price rebounding back to be only 5% from breaking through long term resistance. One of the trend lines is going to give shortly….


LGL


Today saw price move above the down trend line, provided we count the red candle half way along the line a false break. If we consider that its should help form the line then LGL is yet to break. There has been a reasonable increase in volume in the last two days, lending weight to the possibility it has broken, or at least will shortly.


MUN


MUN appears to have broken out of its recent consolidation pattern. It is notable that volume during both patterns has dropped off dramatically after the increase during the preceding rise. Today’s volume was large relative to recent sessions.


NCM


The NCM chart shows a clear break of the downtrend line that has contained prices for 3 months. The break has been accompanied by a strong increase in volume during the last 2 sessions.


NGF


NGF shows a clear break of the trading range on strong volume, which has triggered a 50% gain.


OGC


Huge day today for OGC. Price right on resistance from the end of Feb. Big increase in volume today. Hard not to buy it on a break….


RMS


RMS appears to still be contained within its trading range. There has been 3 high volume days recently and a capital raising has now been digested. There is the distinct possibility of a break higher. The current price is still 75% below its highs of a year and a half ago.


RSG


RSG has now respected the trend line 3 times after yesterdays touch and today’s price action on huge volume. It is poised to move back up to resistance and quite possibly break through.


SGX 2 Year Chart


It is necessary to show the 2-year price chart for SGX. Firstly, price reached and marginally penetrated the white down trend line that has been in place for just over a year. There was a lack of volume though, so no clear break. Secondly, a reverse head and shoulders pattern seems to be forming. This can only be confirmed when price breaks above the neckline at about $6.40/45.

Below is the 6 month SGX chart.


The six-month chart shows a clear triangle trading range. Price today broke above the upper boundary, but the volume and follow though was unconvincing. It will be interesting to see what occurs tomorrow.


SLR


This chart is a fine looking chart. A series of higher highs and higher lows, an increasing gradient of price gains and a bullish candle today on a decent increase in volume. It would be hard to build a technically bearish case for SLR at the moment.


TRY


TRY is also displaying a clear trading range with the exception of the false break. Price is touching the upper boundary and given today’s increased volume looks likely to break out to the upside.


All in all, the gold sector as a whole appears very bullish technically. This combined with Adrian Douglas’s discovery of money moving quietly into gold & silver call options leads me to believe that we have just begun a notable move in the precious metals and the miners. We will need to watch the price action to determine how strong the move is and when it may end.


All the best
Ad