TECHNICAL ANALYSIS: JSE Gold Index – important breakout

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The JSE Gold index has broken out of an almost two-year sideways range and has a significantly higher target in place now.

This makes gold stocks a very attractive buy on short-term weakness.

Recommendation: Buy gold stocks on a pullback
 
Current trend: Short and medium-term up. Long-term turning up.

Chart setup: The JSE Gold Index has broken out above line 2, which is a resistance zone going back to May 2017. This is a very significant development.

  • It has formed a large rounding bottom chart pattern over the past two years (as labelled), and this pattern is giving a significantly higher target.
  • Note, its weekly Stochastic oscillator (on top) is overbought, so this index is likely to give a temporary correction.

Strategy details: Large-cap gold stocks are to be bought for the med-term (that is months). Look to buy on some weakness though.

Target: Its main upside target is 2430, based on its large rounding bottom pattern. (In the immediate short-term, it has reached an initial target zone at 1720-1790, so it's likely to take a temporary breather soon, to allow for new buying).

Stop-loss: A weekly (that is Friday) closing price below 1440. (At the time of writing it was trading at 1695).

gold index

* Colin Abrams is an independent technical analyst. To subscribe to more recommendations by the author, or attend trading courses, please go to www.themarket.co.za

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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