Technical analysis: 9 May 2021
About the author:
- Author name:
- By Violeta Todorova
- Job title:
- Senior Technical Analyst
- Date posted:
- 09 May 2021, 10:00 AM
Spot Gold – Is the correction over yet
After reaching a new record high of US$2,074 in August 2020 and overbought levels on a weekly and daily basis a pull back to unwind the overbought momentum conditions took place.
The correction has retraced to its 38.20% Fibonacci retracement ratio crossing at US$1,675 where support appears to be solid and is likely to hold.
On the daily chart, we now have a small double bottom pattern formed around that level showing that downside momentum is slowing down and that buying interest is starting to build up.
While the down trend line (marked in red on the chart below) needs to be broken upwards before we declare the correction is over, the chart is looking a lot more positive than a month ago.
A break above dynamic resistance of US$1,850 would provide a clear breakout of the current down trend channel and would signal that higher prices are likely to unfold in the months ahead.
Initial resistance around that level could be encountered and a short-term decline could be seen soon, however a subsequent breakout appears to be increasingly likely.
Overall, we don’t have a clear sign the correction is over yet, but we do have the preliminary signs gold might be at a turning point. The weekly chart is constructive and the momentum indicators are firmly in the bull market range.
Therefore, we favor higher price levels in the year(s) ahead and we see levels to US$2,300 as quite realistic.
Copper – Lifting our target
In our last update on the 10th of December 2020 we discussed the bullish implications from the large double bottom pattern completed on the weekly chart and the likelihood of the price rallying over the medium-term.
A strong rally has unfolded over the past five months and our initial upside price target of US$3.90 has been reached and exceeded, with Friday’s price action posting a new record high of US$4.75.
The weekly and monthly charts suggest that a new mega up trend has started as the multi year, large trading range has been broken upwards.
The breakout has bullish implications over the long-term and indicates that the price of the red metal is likely to steadily rise in the years ahead.
The full upside potential based on the current breakout is US$7.00 but given the length of time the consolidation was built, it could take several years for the target to be reached.
Our upside target in the short-term is US$4.90 where initial selling pressure could start building up as the momentum indicators in all time frames are in overbought levels.
Westgold Resources (WGX) - Buy
WGX has been trading sideways over the past year, fluctuating between $1.85 and $2.89.
The current short-term down swing has retraced to a band of multiple support between $1.85 and $1.99 where buying interest is likely to start building up.
The stochastic indicator has reached oversold territory suggesting that the price is likely to bounce in the short-term. The RSI indicator has declined to its previous support also pointing to a likely rebound in the short-term.
The first potential upside price target is $2.40. Over the medium-term, levels to $2.60 are achievable.
Given the proximity to a band of support and to oversold momentum levels, we see the current price levels as attractive to buy the stock.
KGL Resources (KGL) – Approaching support
KGL has been trading in a strong up trend since March 2020 which is still technically intact. The up trend took a breather and the price has been trading in a correction mode over the past few weeks.
The current down swing is approaching its previous resistance of $0.62 where initial buying interest is likely to arise. The RSI and the stochastic indicators have approached oversold levels suggesting that the price is likely to bounce soon.
Given the proximity to previous resistance and to oversold momentum levels, we are of the view that the current decline is likely to be arrested soon.
We see any further short-term share price weakness as an opportunity to buy the stock. The potential medium-term upside price target is $0.80.
Nanosonics (NAN) - Accumulate
The decline from the January 2021 high has lost momentum over the past ten weeks and the price has been trading sideways, fluctuating between $5.13 and $6.47.
The current short-term down swing is approaching its support of $5.13 where strong buying interest is likely to arise.
The RSI and the stochastic indicators have reached oversold territory suggesting that the price is likely to bounce soon.
Given the proximity to previous support and to oversold momentum levels, we are comfortable to start accumulating the stock. The potential upside price target is $6.45. Over the long-term, higher price levels are achievable.
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