CHART UPDATE – GOLD STOCKS LOWER
The charts are beginning to tell the story and the story is expect further short term weakness in the gold stocks. When I look at charts across a sector, such as gold and I see a consistency in the chart patterns which point in a certain direction, I can’t ignore the evidence. We are at such a point now.
First let’s look at a chart of the HUI
stockcharts.com
Notice that after the recent new high, the price spiked down and then for about a week the price pattern formed a down flag. Flags are continuation patterns. Meaning that if price was moving down just before the flag formation they will continue down and if they are moving up, they will continue up. Flags can also be used to measure a move. Flags usually form at the ½ way point of a move. The high of the of the flag pole occurred at about 214 and the bottom of the flag pole is about 200. This means the flag pole is about 14 points. If this is the ½ way mark we have another 14 points to go or the move can be projected to about 186 or so. Also, the recent high was the head of a small potential h&s top which projects to 152. As with all H&S formations we should wait for a penetration of at least 3% of the neckline, but there is a high probability that this will occur if the flag formation projections are validated.
. So we have two patterns which project lower. For now that is what we need to know.
When we look at the newmont chart we can see similar patterns.
stockcharts.com[m,a]dahlyyay[dd][pb50!b200][vc60][iUb14!La12,26,9]&pref=G
Notice the H&S top and the flag. In this case the flag also forms the right shoulder of the H&S formation and since this H&S is completed, it gives us added confidence that the H&S will be completed in the HUI chart pattern.
It is interesting to note that both the H&S target and the Flag target on Newmont are about the same i.e. 34, which corresponds to a support area.
Similar patterns can be seen in CDE.
stockcharts.com[m,a]dahlyyay[dd][pb50!b200][vc60][iUb14!La12,26,9]&pref=G
Hecla (flag only)
stockcharts.com[m,a]dahlyyay[dd][pb50!b200][vc60][iUb14!La12,26,9]&pref=G
Agnico
stockcharts.com[m,a]dahlyyay[dd][pb50!b200][vc60][iUb14!La12,26,9]&pref=G
Goldcorp
stockcharts.com[m,a]dahlyyay[dd][pb50!b200][vc60][iUb14!La12,26,9]&pref=G
Harmony
stockcharts.com[m,a]dahlyyay[dd][pb50!b200][vc60][iUb14!La12,26,9]&pref=G
And others.
Conclusion:
Since HUI and many of its components are pointing lower, there is a high probability that the gold stocks will continue lower. It is unlikely we will see a rally until the downside targets are reached.
Live long and prosper,
Little joe |
