CHART UPDATE
This weeks action has turned me short term bearish and as I reported to the thread I closed out long gold options positions and other positions. One of the concerns I have about the recent break in price is that it appears to be across the board. Very few stocks were up on Friday and several exhibited some very nasty candlesticks. Do I think the gold bull is dead? Absolutely not, the long term picture clearly remains positive.
As far as the near term here are my thoughts:
Let’s look at a few short term charts of the HUI. Closed yesterday at 191.68
stockcharts.com
I have a few observations regarding this chart. First the 50 day moving average (red) is a likely support area. It is at 183.28. Also, there is minor support at 180.
Also note the RSI chart at the top. You will notice that the last few times it went below 50%, it turned up quickly and a bottom occurred. This is important to observe. I am watching to see if this repeats. If a deeper and longer break in RSI occurs, the likelihood is that the correction will be worse.
This chart is the same as above except the indictor at the top is %R.
stockcharts.com[m,a]daclyyay[pb50!b200][vc60][iUk14!La12,26,9]&pref=G
This indicator is signaling an oversold condition, as of yesterday’s close.
My conclusion is that we are likely to see a bounce in the HUI in the next few days from 180 – 185 area. It will be important to observe the nature of this bounce. If is a dead cat bounce, I think we could go lower. If the market reverses quickly that could be the correction for now. The point is we need to wait for the market to give us a signal and hope we can be nimble enough to profit from it. I am going to play this one with some gold stock calls probably NEM, but I will be using close stops.
The next chart I want to check out is NEM. It closed at 38.91 yesterday.
stockcharts.com[m,a]dahlyyay[dd][pb50!b200][vc60][iUb14!La12,26,9]&pref=G
Its RSI chart is similar to the HUI as is the %R.
stockcharts.com[m,a]daclyyay[dd][pb50!b200][vc60][iUk14!La12,26,9]&pref=G
Its 50 day moving average is 37.92 and there is support at 37.50.
With support at 37.92 and support at 37.50, we have a likely area of at least short term support. This is the area I will be watching for NEM and likely where I will buy options.
If the above support areas are penetrated, we are definitely in for a longer correction.
I will also be looking for confirmations in other indexes, such as the CRBI, Dollar, XAU and other HUI stocks when I make a decision to enter the market. If these look weak, I may stand aside.
Live long and prosper,
Little joe |
