Saturday, September 25, 2010

Gold Miners

With gold making new highs, I thought it would be interesting to have a look at how the gold miners are faring. So, here is a detailed analysis of the gold miners index. The gold miners ETF chart is very similar to the index chart shown below, so I won't be going through that. I decided to do a detailed study of the index as I thought it might be of some help to you charting newbies out there. Here is a daily chart of the gold miners index.

1. The first thing that should strike you is the importance of the 1508 level. This is the level where the index was thwarted at in November 2009 and it again acted as resistance thrice this year before it was finally broken through this month. I am sure you readers will agree that this is an important price level for the index.

2. The recent run in the index has found constant support at MA(20) during this rally from August. It has bounced off it four times during this run.

3. Notice the negative MACD and Stochastics divergence forming this month i.e. the price has gone up but the Stochastics and MACD haven't followed this price upwards but have instead gone down. This usually signifies a pullback in the near term.

4. To sum of all the above, a pullback to the 1508 level seems to be on the cards. At this level, the index should find support not only due to the important of this level, which was very important resistance earlier but has now become support but also due to MA(20), which should meet the price here.

In short, a successful test of this level should provide a great buying opportunity next week. I hope this detailed analysis was of some use to you readers. I will be back later with a shortlist of gold stocks that I like heading into next week.

Take care and good luck!

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