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SXR heading for breakout
Colin Abrams
Posted: Mon, 26 Feb 2007
[miningmx.com] -- WE look at a stock that’s preparing for a large breakout on its chart, SXR Uranium.
The uranium price itself has increased manifold, and uranium stocks appear to be the ‘next big thing’.
The chart of SXR indeed provides an interesting picture. We also look at a chart of the JSE gold index and show the relevant levels to monitor there.
SXR, according to its chart, is a stock to focus on buying with good upside potential to come.
South African gold shares however continue to lag and are best avoided until their downtrend is broken. (Platinum shares are still far superior to gold shares on a relative basis.)
SXR URANIUM – Building up for large rally
Trend: Sideways
Strategy: Buy on either a closing price above R105, or on a pullback towards line 3.
(Daily)
Click on image to enlarge
· SXR is trading in a large channel and hasn’t given a definite breakout as yet (at the time of writing). Line 3 and on the 50-day moving average provide support at R90.
· The daily Stochastic Oscillator (on top) is neutral, but with an upward bias.
· For now wait to see which happens first, a close above R105, or a pullback towards R90 (line 3). Buy when whichever of these two events occurs first. If the pullback occurs first, then look to start buying near the R95 level.
· Once the price closes above R105, it’ll set up a minimum target of R124.80 measured as the height of the channel projected up. However, due to the length of this channel, expect the price to move a lot beyond that target (R133 is a more realistic target).
· Place your initial stop-loss as a close below R90. In the very unlikely event of the price falling back to line 1 (R81.60), buy off there.
JSE GOLD INDEX
Trend: Sideways to down.
Strategy: Avoid gold shares until the price eventually breaks above line 2.
(Daily)
Click on image to enlarge
· The JSE gold index continues to lag most other sectors on the JSE by a large margin. The index is in a falling wedge between lines 1 and 3. Line 2 is important resistance, currently at the 2,930 level. As long as the price remains below line 2, the general trend here is still negative.
· The daily Stochastic Oscillator (on top) is moving down from the overbought level in the short term, pointing to more falling to come in gold shares.
· Therefore, one should be avoiding gold shares until such time as the price closes above line 2 (2,930). Aggressive traders, however, can buy gold shares only if the price reverses up off line 1 (2,650). But this is risky and better opportunities are available elsewhere on the market.
· The bottom window compares gold shares with platinum shares on the JSE, and the falling line shows gold shares continuing to underperform platinum shares.
Please note: for more recommendations and charts by the author on shares, stock indices, and commodities, please go to www.themarket.co.za
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