06/19/06 - TraderMike: Gold StocksUpdate
I've been pounding the table ongold stocks for the past few weeks. Why??? Because by the endof the summer they should be rising in a powerful rally - one that willtake them well beyond their recent highs. And frankly, I don't want youto miss out on it.
After going up month after month they havepulled back over the past few weeks to finally give us a powerful entrypoint. I recommended averaging into them a few weeks ago. Although theymanaged to slip lower since I started to average in, they appear to havenow put in their final bottom and are stabilizing as we speak.
More important to watch though is the XAU/gldand HUI/gld ratios. Gold stocks tend to lead the trend of the gold marketso when these ratios go up it is bullish for gold and gold stocks andwhen they trend down it is bearish. Both ratios have been declining sincethe May top, but bounced hard last week as gold stocks solidlyoutperformed gold during the rally.
However, this ratio is now on resistance andmoved down a little on Friday. These two things taken together tell methat we are probably going to see a short-lived pause before gold stocksmove higher. That's fine. They need to stabilize and consolidate abit after going through this correction.
The setup right now is very similar to what wesaw on the March bottom. Days after bottoming in March the XAU rallied upto its downtrend resistance line while the XAU/gld and HUI/gld ratios didthe same thing. Gold stocks then paused for a few days before breakingout of all of these resistance points and starting their next bigrally.
We could easily see the same thing happen thisweek - a pause and then a key breakout. I'll be watching the action verycarefully this week and will send out another bulletin when I think goldstocks provide a good entry point.
Top10 Blue Chip Stocks With Market Caps Above $500 Million
Yamana Gold(AMEX: AUY, Toronto: YRI) 5/05/06 $11.25
Glamis Gold(NYSE: GLG) 5/22/06 $33.55
Bema Gold(AMEX: BGO) 5/22/06 $4.75
Agnico Eagle(NYSE: AEM) 5/22/06 $32.45
NovaGold(AMEX: NG, Tortonto: NG) 5/30/06 $14.00
Southern Copper(NYSE: PCU) yields 12.90% at entry point 602/06$87.60
Meridian Gold(NYSE: MDG) 6/02/06 $32.25
Eldorado(AMEX: EGO) 6/13/06 $4.21
Tanzanian Royalty Exploration(AMEX: TRE) 6/13/06 $6.40
Top10 Emerging Growth Stocks With Market Caps Below $500 Million
Paramount Gold Mining(OTC: PGDP) 4/24/06 $3.40
Eaglecrest Explorations(Vancouver: EEL) 4/26/06 $0.60
Battle Mountain Gold(OTCBB: BMGX) 4/27/06 $0.58
Blue Pearl Minig(Toronto: BLE) 5/09/06 $3.20
Alhambra Resources(Vancouver: ALH) 5/10/06 $2.78
Gold Reserve(AMEX: GRZ, Toronto: GRZ) 5/30/06 $7.27
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