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« GOLD: Update 02 December 2007 | Main | Northern Rock: Let it fail! »
Saturday
Nov242007

Gold Stocks Preparing For Next Leg Up

Having corrected slightly from their highs, gold stocks are now looking to start the next leg up of this rally.

HUI 221107

It looks as if this small correction is coming to a close and although we may see a period of consolidation, the downside now appears to be limited at (for the HUI) the 400 level.

Note that the STO is now bullish on the HUI although not all technical indicators are giving us positive signals at moment. The MACD has yet to show us its bullish crossover signal, although the black line appears to now be turning upwards and so we could see this signal fairly soon. The drop from roughly 460 to about 400 represents a correction of roughly 15% so not buying gold stocks over the last month or so has arguably saved you some money. Admittedly, this is not a fantastic amount, but still money is money and is worth trying to save if possible.

We changed our signals from BUY to HOLD when the HUI was trading at around 400, and now that is has pulled back slightly to the 400 level, we feel that we are approaching a time where we can feel comfortable with buying more gold shares again. When we begin purchasing gold shares again, we will let our readers and subscribers of The Gold Prices Newsletter know immediately.

Let us take a look at the condition of some individual gold stocks. First up is Agnico Eagle which we have been shareholders in for a number years and some of the team remember trading this very same company back in the gold bull market that ended in 1980.

AEM 221107

As in the HUI, we also have a bullish Full STO signal being given on the chart for AEM. However the MACD for AEM is slightly more oversold than that of the HUI. For AEM the indicator is in the negative territory, whereas the MACD for the HUI is still positive. Therefore this suggests that AEM is in a better position to buy at the moment as it is slightly more oversold than the average gold stock in the HUI. We will be watching AEM and may change our signal from HOLD to a BUY again very soon.

The same could go for Kinross Gold, which has been in our portfolio for a great deal of time and has been one of our best performers.

KGC 221107

The MACD for KGC is higher than that of AEM, in line with that of the HUI, but the main thing to look for is that bullish crossover where the black line breaks up through the red. Kinross has taken a 20% hit but is finding support at around $17.00, just above its 50 day moving average line. As with all gold stocks, we are watching Kinross closely and we are looking for a good opportunity to mark this stock as a BUY again.

Our main aim during this bull market is significant long term gains and something that has really encouraged us for the long term is the performance of Yamana Gold in the last few months. Yamana has been one of the best performing stocks of its size in the gold sector however, the stock had what some investors would describe as a dark cloud hanging over it. When Yamana announced its takeover of Meridian, many investors sold off the stock and it continued to suffer as the talks continued. Investors were worried for a variety of reasons. Some thought that the takeover would create a company too large to offer significant leverage to rising gold prices and some thought that the company was growing simply for growth's sake, which is not nessersarily the best strategy. Then there were some investors who sold the stock just because others were selling and the stock price was suferring.

Indeed we were also slightly concerned that Yamana would become too large to offer significant gains in the future. However those qualms have been put to rest by the recent performance of the stock, which has risen from around $9.50 to over $15.50 in a few months, a gain of over 63%.

AUY 221107

Another positive sign for the longer term is the crossing of the moving average lines. The 50 day moving average line has broken up through the 200dma which is a positive signal for the longer term. Looking toward the shorter term, the STO is now bullish on AUY, although the MACD is yet to give a defiant buy sign. After its impressive rally, Yamana has dropped back to its support on the moving averages at about $13.

In conclusion, we are looking to change our signals from HOLD to BUY fairly soon, as there has been a small correction and the technical indicators are no longer overbought for most gold stocks. You can stay updated on when these signals change by subscribing to The Gold Prices Newsletter for FREE. Just click here and enter your email address to subscribe.

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Reader Comments (3)

Thank you again , Gold-Prices.Biz , for great charts and tech analysis. In this correction Hecla Mining (HL) , more of a silver stock-(in my humble opinion)is also a very strong stock worthy of notice. It had hardly pulled back, showing strong relative strength , and if you look at the cup and handle that formed July to Oct of this year...it shows that it springs forth from a nice base. There are more, as I'm sure your readers are aware , like GG and others..but I just wanted to share HL with you and your readers , due to its strength during the correction.

best regards...Robert

November 24, 2007 | Unregistered CommenterRobert

P.S. However , I wouldnt buy HL here yet. It should pull back again, maybe filling the gap at $11, or retest $10.00 breakout?? Just wanted to point out the strength , and macd stayed positive , and 50ma stayed over 200ma. happy trading!

November 24, 2007 | Unregistered CommenterRobert

Hi Robert,

We have just published an article on HL on our silver website, www.silver-prices.net which may be of interest to you.

You can view the article

As well as www.gold-prices.biz we also run this silver website and a uranium website, www.uranium-stocks.net
Feel free to take a look at the sites and subscribe to their free newsletters.

Regards,

November 24, 2007 | Unregistered CommenterGold Prices

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