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
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
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 &
Six sessions ago, AND respected the trend line for the 4th
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.
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.
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.
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….
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 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
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.
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….
NGF shows a clear break of the trading range on strong volume, which has
triggered a 50% gain.
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 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.
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 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,