Bring on the hurdles...
Friday February 21 5:11 PM EST
US OPTIONS FOCUS/Gold bull run facing some hurdles
CHICAGO, Feb 21 (Reuter) - The prices of gold and gold stocks may have posted near-term reversals, but from the perspective of options trading and technical analysis, a bull run is facing some near-term hurdles, analysts said Friday.
On Thursday, the Philadelphia Stock Exchange's (PHLX) gold/silver index .XAU rallied 3.69 points, or about 3.2 percent, to 118.61, breaking through a downtrend line drawn off the June 1996 peak. It dipped back to 118.53 Friday.
The index spent January and early February basing in the 105 to 110 region before moving higher.
"I like to call it improving but still facing important roadblocks to be convincing to the upside," Gregory Nie, technical analyst at EVEREN
Securities, said of the XAU.
The move in the XAU has come in tandem with a move in spot gold and gold futures.
Nie said 130 on the XAU and 360 on the April Comex gold futures contract were the two key levels to watch.
April futures finished at 354.10 Friday.
"If you get a move through both of those levels, then you could start saying this is a positive trend," he said.
Tim Ord, who publishes the Ord Oracle newsletter, said in a report that on weekly candlestick charts, bullish patterns have been drawn every week since the first week of January.
"If you got through 130, you'd have a pretty easy trip to 136, possibly 140," Nie said. A move through 140 on the XAU would likely push it through a downtrend line drawn off the February 1996 peak, he said.
The bounce in the XAU, which comprises nine stocks including Homestake Mining Co and the U.S.-traded shares of Barrick Gold Corp , has been accompanied by a pickup in options activity, a PHLX spokesman said.
"People beat gold down pretty much over the last couple of months, so it's gotten a little sponsorship now," he said.
He said daily options volume in the XAU was around 1,000 contracts at the beginning of February but had since climbed to around 2,800 contracts a day, with a few spikes in between.
Todd Salamone, senior analyst at Investment Research Institute in Cincinnati, said XAU put buying had been relatively low compared to call buying recently.
"That call accumulation tends to be favorable from the speculative crowd," he said. "From a contrarian viewpoint, we'd view that bearishly."
He added, however, that call accumulation can create short-term bullishness if market makers buy underlying securities to hedge postions.
Overall, he characterized the recent upturn as a bounce within a longer-term downtrend, explaining that some major equities, such as Homestake Mining and Barrick Gold, are closing in on heavy call-related resistance.
"Short-term it may be a little overextended, but over the next two to three years it should be much, much higher," Jay Shartsis at R.F. Lafferty & Co in New York said of gold. ((--G.Crawford, 312 408 8750/Email: derivatives @reuters.com)) |
