Special Gold Update
The Big Picture
Jack Chan
www.traderscorporation.com
April 11, 2005
Gold stocks in general have
been in a corrective phase since Dec 2003, and its been very
frustrating for many gold bulls, who are either seeing their
portfolio shrinking over this period, or getting whipsawed trying
to trade the short term tops and bottoms.
This $HUI:$GOLD ratio chart
is getting popular among technicians, simply because gold stocks
outperform bullion in an impulsive phase, and underperform in
a corrective phase. Current correction is seventeen months old
and is the longest and deepest correction since this new bull
market began four years ago. Until it breaks out, there is not
much we can do except trying to trade the short term with tight
stops to preserve our capital. Patience will pay off big time
once the correction is over.
A closer look
Bullion broke out of the pullback
trendline this week, with support at 200ema, waiting for MACD
to confirm a BSBS (bullish support buy signal).
Meanwhile, the ratio chart
made a lower low indicating stocks underperforming bullion, while
MACD is making a higher low resulting in a bullish divergence.
Price has also reached trendline
support this week, and if the bull market is to continue, now
is the time.
Of course, we need a little
help from our friendly dollar, with a reversal on Fri at the
200ema resistance, a nice follow thru next week will break the
uptrend, and when confirmed with MACD, we'll have another BRSS
(bearish resistance sell signal).
My homemade BPGOLD crossed
down for a sell signal this week, but my attention is on the
index itself as it is tracing out a perfect contracting triangle,
in locked steps with the major correction taking place since
Dec 2003. Normally, a consolidation against a major trend resolves
in the direction of that trend, and therefore, my expectation
is a major breakout after wave E is completed and holds support.
We reached that support this week and it must hold to get a shot
of breaking out.
Our near term strategy: keep it simple
- Traders/investors who are
currently holding gold stocks or funds can continue to hold,
but exit all positions should support fails.
- Traders/investors who are
in cash, wait for the breakout of the BP chart before accumulating/buying
gold stocks again. (subscribers receive updates and alerts on
this homemade BP chart.)
JC
April 9, 2005
Jack Chan
email: info@traderscorporation.com
website: www.traderscorporation.com
321gold Inc
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