Saturday, January 24, 2009

Another look at Gold

One of my picks from my New Year's post, Two-thousand and nine predictions, was Gold. As we near the end of the first month of 2009, let's take another look at Gold.


Here is a Weekly Triangle chart on Gold. As you can see, the Buy Triangle from November of last year was reversed on the January 12th Sell Triangle. That short-lived Sell was just this week reversed to a Buy with a brand new Buy Triangle. If you haven't figured it out by now, a Triangle that results in a loss is often followed by a very profitable Triangle as the major trend is re-asserting itself. That appears to be what is happening in Gold.

Gold Weekly


The Daily Gold Triangles have been very effective in navigating in and out of Gold on a very short term basis:

Gold Daily


Adding to the bullishness of the Daily and Weekly Triangle Buys is a break-out of GLD, the Gold ETF, out of an almost one year long down channel. Notice how GLD breaking out of the down channel is accompanied by a break above its 50 week moving average and confirming bullishness in the MACD and RSI indicators:

GLD Weekly


Although I like to play individual Gold Mining stocks because of their inherent leverage to the price of Gold, probably the safest bet in an intermediate to longer term move in Gold is the double beta gold etf, DGP:

DGP Weekly


The above chart shows a nice break out above a one year down channel and suggests that there isn't much resistance until the mid-20's. Below, the Weekly Triangle chart confirms an Intermediate Term Buy Signal:

DGP Weekly Triangles


In summary, from a bullish set-up at the top of the year, Gold faltered a bit, mid-month, but has come roaring back with contemporaneous Buy signals from independent charting techniques. Thus, Gold is telling us to take notice of this chart strength and to disregard (for now) the blip lower earlier in the month.

DGP will effectively capture about twice the percentage move up that is being signaled by these Buy signals and may very well be the best core position for playing the upside.

My favorite speculative gold play is Capital Gold:

CGLD 90 minute chart



Not shown on the chart are Wave 5 projections between $0.90 and $1.00, almost a double from current prices. Click on the link above ("Capital Gold") to go to their web site and examine the fundamentals, which appear to be outstanding and certainly much improved since this stock sold for $2.00 a share in 1999. If gold is on any kind of sustained run here, CGLD has the potential to be a multiple bagger.


A

16 comments:

Anonymous said...

Allan,

ACTC mentioned with GERN ...

http://biz.yahoo.com/ap/090123/stem_cells_business_prospects.html?.v=4

...this should attract more buyers next week. we could see 0.20. if so, where do see its next resistance...or you think this will be an unstopable train??

dk

met61 said...

Allan,another gold stock to take a look at is NXG.It broke out yesterday on heavy volume,closing at 1.19 after trading as high as 3.45 in the past year.The P/E is 12 and the price to book is .6.If gold continues to rise,this could be a big winner.
Ron R

Anonymous said...

I agree with your Gold call.

To me it looks like a bull flag with five waves of the flag ending at the previous low of $700. My minimum target is $1150.

Inflation is at 0%, but with he US currency is going to heck with government out of control, Gold is going higher.

Alex

Anar said...

Another good gold name is DROOY - "Gold company in South Africa that has been in business since 1895. In 1979-1981 it made a run from $15 up to over $500."

Allan said...

Ron sent me an email just after I posted this blog, suggesting I look at NXG; I did and I like it and would have included it in the post, had Ron got to me a few minutes earlier.


A

Anonymous said...

Allan

My concern with CGLD is the prospect of an almost certain Reverse Split and the impact on the price. I have yet to see an increase after one. Your thoughts?

Anonymous said...

Why are commercial futures traders (supposedly the guys in the "know")greater than 2:1 short gold???

Allan said...

Re: reverse split. Apart form the obvious answer that it's not news, rumor has been around a long time and therefore should already be factored in the stock price, here is an post from Yahoo:

"It looks like this may be your first post here. The reverse split for CGLD is to allow listing on the AMEX and allow some institutional investors to take positions.

"Take a peak at the company website for the financial information. CGLD is making money and will soon announce a big increase in gold reserves. Think whatever you may, but with the price of gold rising and the gold output for the commpany rising, the increase in reserves to be announced soon will generate a large increase in the valuation metrics.

"I do not care if you accuse me of pumping--since the stock price will not change based on this post. And I am not in a hurry to sell. The Obama stimulus plan means increase in the money supply and eventually inflation. CGLD is a leveraged play on the price of gold. With proven management it is IMHO a low risk play."

Allan said...

RE: Commitment of Traders Reports

Buying when a stock is advancing is called Trend Following and is one of my core tenants in investing.

Selling into an advance is called Market Timing and do so at your own peril. Reversing a trade based on the COT Reports is about as deep as you can get into Market Timing.

Anonymous said...

Allan:

Where do you stand on NNVC?

Anonymous said...

Anonymous @ 5:58AM,

Where have you been the last two years??? Dumb question!

Anonymous said...

Allan,

ACTC @ 0.22 ...

can this actually go to 0.50's without stopping??
STEM CELL is hot right now.

thanks for your input.

dk

Anonymous said...

I think Allan's gold analysis is excellent. Right now I'd be stockpiling bars in my basement.

The US economy is NOT coming to an end.

It already has. It is over and is not coming back. Sure we have this blog to keep is afloat. But at 1,000 readers a day that is an insignificant % of the population.

Goodbye America... it was fun while it lasted.

Dave said...

RE: ACTC

I've got a GTC sell order of $5.00 on my shares. :-)

Actually, even though I know Allan is probably evaluating this right now, I believe in the short term this has the potential to go anywhere from $.75 to $2.00.

Dave

Allan said...

Geez, Dave, have I become that predictable?

Anonymous said...

I'm new to this blog only having read it for a couple of weeks.

Like most, I follow Cramer and his picks religiously. He sticks with strong, solid stocks whereas, here anything over 75 cents/ share is a "blue chip."

There does seem to be some good advice here, maybe not on par with Cramer, but for those of you Cramer followers, some of the AllAllan picks could serve to diversify your account in a significant way.

So I suppose what I am saying is that this blog DOES have some serious nuggets of wisdom on it and should not be simply dismissed out of hand. I strongly suggest that the readership take this man Allan's picks seriously instead of merely casual comments on the market.

The TA here is good and, although short on fundamentals, there is merit to that too.