Technical Analysis: 9 August 2019

About the author:

Violeta Todorova
Author name:
By Violeta Todorova
Job title:
Senior Technical Analyst
Date posted:
09 August 2019, 5:17 PM

We have been bullish on gold for quite some time and we are of the view that the recent breakout confirms that a primary up trend is now in place. Australian gold miners have been on a tear and despite the current short term overbought momentum conditions we are of the view that there is more upside in the coming months.

Here are our latest updates on gold:

In our last update on May 16, we discussed the likelihood of gold trading higher and our initial upside price target of US$1,350 has now been reached (the price posted a high of US$1,344 on Tuesday).

While the precious metal is overbought on a short term basis and a minor pull back could unfold, the weekly chart is constructive and a re-test of key resistance of US$1,374 is likely.

The higher lows on the weekly chart show that yellow metal has been in a process of building a large base over the past three years and we see a subsequent break above resistance as highly likely. A break above US$1,374 will complete and confirm a large bullish ascending triangle pattern with initial long term upside target of US$1,500.

The gold price has surged over the past two months, hitting a new 6-year high of US$1501 overnight. Assets like gold are responding to signs of global economic weakness.

Buying the U.S. dollar, bonds, gold and bitcoin as an alternative asset, are good bets if the environment worsens. Bullish bets on the precious metal are accelerating amid increasing expectations that the Fed will continue to cut rates, which is an upbeat environment for bullion, even if the U.S. dollar continues to firm against its rivals.

The ten-year weekly chart (see below), which is very reliable in determining the long term trends, shows a decisive break above its key resistance of US$1374, suggesting that a new primary up trend is now in place.

After years of dominating the market, the bear has finally gone for its winter slumber and is likely to stay there for awhile. Now that the breakout has occurred our bullish conviction increases even further.

After a prolonged consolidation, the first leg out of the trading range is usually impulsive, therefore we can reasonably expect a fast advance to US$1650 in the coming months.

The weekly RSI indicator has moved firmly into the bull market range, adding further confidence in the long term bullish outlook for the yellow metal. In the short term the commodity is overbought and a pull back to unwind the overbought momentum conditions could be seen soon. 

Evolution Mining (EVN) – at record highs

In our update on April 28, 2019 we discussed the likelihood of the price trading higher and recommended clients buy the stock at $3.30. A strong rally has unfolded over the past three months and our price target of $4.20 has now been greatly exceeded.

The weekly and daily momentum indicators have reached overbought territory suggesting that the price is likely to pull back in the short term. Therefore, active traders may consider lightening positions.

Over the long term, our view on the stock remains positive and we will update our price targets once the anticipated correction is complete. 

Newcrest Mining (NCM) – approaching key resistance

NCM has been trading in a strong up trend since September 2018 which is still technically intact.

The weekly and daily momentum indicators have reached overbought territory suggesting that the price is likely to pull back soon.

The current upswing is approaching its key resistance of $43.46 where selling pressure is likely to arise. Given the proximity to key resistance and the overbought momentum readings we are of the view that the near term upside from here is likely to be limited.

Northern Star (NST) – lifting our target 

In our update on April 28, 2019 we discussed the likelihood of the price trading higher and recommended clients buy the stock at $8.23.

A strong rally has unfolded over the past three months and our price target of $11.00 has now been reached and exceeded.

The RSI indicator is approaching overbought territory suggesting that a short term pull back is likely to take place soon.

Over the long term, we don’t see a reversal of the up trend and we lift our price target to $15.00. 

Ramelius Resources (RMS) – buy on weakness

RMS has been trading in a strong up trend since November 2018 which is still technically intact.

The current short term upswing rallied from a low of $0.70 to a high of $1.44 on Thursday, pushing the weekly and daily momentum indicators into overbought territory.

This suggests that a pull back to unwind the overbought momentum conditions is on the cards.

Over the long term, we don’t see a reversal of the primary up trend and we believe a re-test of the $1.70 zone is highly likely in the coming months. 

Red 5 (RED) – lifting our price target

In our last update on June 7, 2019 we discussed the bullish implications based on the breakout above resistance of $0.14 and opened a tactical buy on the stock at $0.15.

A strong and consistent rally has unfolded over the past two months and our initial upside price target of $0.18 has now been greatly exceeded. Wednesday’s price action posted a 6-year high of $0.33 pushing the weekly and daily RSI readings into overbought territory.

This suggests that a pull back to unwind the overbought momentum conditions is likely in the short term.

Over the long term, we don’t see a reversal of the primary up trend and we lift our price target to $0.36. 

Regis Resources (RRL) – target reached

In our update on May 16, 2019 we discussed the likelihood of the price trading higher over the medium term and recommended clients buy the stock between $4.40 and $4.50.

A strong rally has unfolded over the past two months and our initial upside price target of $5.60 has now been reached and exceeded.

The weekly and daily momentum RSI readings are approaching overbought territory suggesting that the up trend is likely to take a breather in the short term.

Although, at this point there is no sign that the secondary up trend is over, active traders may consider lightening positions. 

Resolute Mining (RSG) – closing our tactical buy

In our last update on October 4, 2018 we discussed the improvement in momentum conditions and the likelihood of the price trading higher and opened a tactical buy on the stock at $1.09.

The price traded sideways until June 2019 the price finally surged over the past two months posting a high of $2.12 earlier in the week.

The current price levels are close to a multiple resistance between $2.14 and $2.35 where initial selling pressure is likely to arise.

The weekly and daily momentum readings are in overbought territory, therefore we close our tactical buy. 

Perseus Mining (PRU) – still tracking well

In our update on October 4, 2018 we discussed the implications from the small bullish breakout and the likelihood of the price trading higher.

A strong rally has unfolded over the past year with the current price action re-visiting its key resistance of $0.90 and posting a 6-year high.

The weekly and daily RSI readings have reached overbought territory suggesting that the rally could take a breather in the short term.

Over the long term, levels to $1.05 appear achievable.

St Barbara (SBM) – closing our long position

On March 22, 2019 we opened a small long positions at $3.21 just to see the price slipping lower in May.

In our last update on June 5, 2019 we discussed the likelihood of the price bouncing in the short term and recommended clients use the likely coming strength as an opportunity to close the long position.

The price rebounded strongly over the past two months but still underperformed the move in gold. We see a good probability of the price filling up the recent gap, which means that the rally could extend further to $4.45.

We would use the current and/or any further strength as an opportunity to close our position.

Westgold Resources (WGX) – target reached

In our last update on May 16, 2019 we discussed the likelihood of the price trading higher and recommended clients buy the stock at $1.40.

A strong rally has unfolded over the past few months and our price target of $1.95 has now been reached and exceeded.

While the stock is overbought on a short term basis and a mild pull back could take place, we see a probability of another leg higher taking a place.

We recommend active clients lighten positions between $2.20 and $2.60. 

More information

Morgans clients can login to view all recent technical analysis on companies we cover by browsing the research section and filtering by 'technical analysis' in the Market Updates section. If you are interested in finding out more, please contact your nearest Morgans office.

Disclaimer: Analyst owns shares in: EFACustomAnalystPosn. The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents ("Morgans") do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.


 

  • Print this page
  • Copy Link