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Things may be looking up for gold bugs. The sellers are gone, and the
bargain hunters have returned. Is this the reversal gold bugs have been
waiting for? Or is it a short term bounce only to be followed by another leg
down? Technical analysis says we may be seeing the beginning of another
powerful upswing for the precious metals and gold and silver stocks.
Gold and silver stocks have been under pressure over the last several
weeks. But we now are seeing signs of a bullish reversal. A look at the
technical indicators for the HUI gold stock index gives us the first hint.
The indicators we will examine here are Ichimoku
Kinko Hyo, candlestick analysis and Moving Average
Convergence/Divergence (MACD). Taken together, these technical indicators
provide a degree of corroborated information from which to trade.
 
So let’s look what these three technical indicators are telling
us about the HUI. We can see from the daily basis chart that on May 16th,
the HUI halted its slide begun earlier this month, and has traded up in the
last several sessions. Price action on May 16th produced a doji candlestick. The doji
typically marks a reversal in an established trend. The doji
candlestick has a long shadow and a small body, which traces out the push and
pull between buyers and sellers, and reflects the fact that neither buyers nor
sellers dominated the day’s trading. We can see that the May 16th
doji in fact marked a bullish reversal at the
376.86 level. The long white candle on May 17th and following
sessions pushed the HUI up to 412 or so.
The next set of indicators to examine is Ichimoku
trend and momentum. Today, most Ichimoku indicators
are bearish, but there are some bullish signs. Price action is below the
cloud, which is bearish. The projected cloud is bearish (shaded pink) with
Span A below Span B. And the Chikou Span (green
trace) is below price action and the below the cloud, which is a bearish
signal. Yesterday, price action climbed briefly above the Kijun
Sen (red trace), which is a bullish sign. The Chikou Span, the momentum indictor, has made a move up,
and could climb up to the breakout area covering the 420-470 price levels. In
this area, the Chikou Span would be above price
action, which would be a strong bullish indicator. From there, price action
could break above the cloud at 444, the projected resistance level. By then,
the projected cloud would be bullish as well.
The near term dynamic displayed by the MACD shows that the breakout
scenario may in play already. The MACD shows the HUI to be oversold, with an
index bottoming out at -20.0 on May 16th, then making a bullish
crossover on May 21st.
Aggressive traders use MACD crossover signals to buy and sell. More
conservative traders are happy to wait for the trend to develop fully, as
indicated by all five Ichimoku indicators before
committing capital. There are trading rules and strategies that combine Ichimoku with other technical indicators that work well
in volatile markets. Aggressive and conservative investors alike can benefit
from technical analysis of gold and gold silver stocks. Our analysis of the
HUI is telling us we may be seeing blue skies for gold and silver stocks soon.
Responsible citizens and prudent investors protect
themselves and their wealth against the ambitions of over-reaching government
authority and debasement of the currency by owning gold. Gold is honest
money. Investors from around the world benefit
from timely market analysis on gold and silver and portfolio recommendations
contained in The Gold Speculator investment newsletter, which is based on the
principles of free markets, private property, sound money and Austrian School
economics.
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