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SA gold index due for breakout
Colin Abrams
Posted: Mon, 01 Oct 2007
[miningmx.com] -- WE LOOK AT an interesting chart of the JSE gold index, which has had a good rally on the back of a strong gold price.
The JSE gold index has broken important resistance and gold shares are to be bought – but only after a pullback.
Trend: Short term up, but overbought. Medium term turning up.
Strategy: Buy South African gold shares but only after a pullback.
Click on image to enlarge
• The gold index has broken out of a large declining broadening formation (lines 1 and 2). That’s very significant.
• However, over the short term the RSI is overbought, so a pullback is expected before more upside.
• Both short- and longer-term players should buy on a pullback towards line 1 (2 580 level). Look for an upward reversal from there to confirm your entry.
• The minimum upside target is 3,200 – i.e., the height to the pattern projected up (over the next six months). The price has the potential to go higher than that, but will be reassessed when it gets there.
• Your initial stop-loss is technically a close below 2,500. But because you’re waiting for an upward reversal from the 2,580 level (to buy), rather place the stop as a breaking of the low of the upward reversal from there.
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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