The stock moved to bull phase on Feb. 28 and has reached higher highs on four of the five subsequent trading days, but the upswing actually began on Jan. 25, pushing prices to levels seen only in a huge spike on July 2008, but never before or since.
The chart shows a strongly rising average directional index (adx) pushing through the magenta zone (the 30s). That counts as strongly trending, a plus for traders playing a price-channel trend following game.
| sym | chan | adx | traj | psar |
|---|---|---|---|---|
| GG |
However, there are caveats with GG that shouldn't be ignored. It is a primary commodity. These are volatile. The gold run-up is tied to political events in North Africa. Revolutionary politics are volatile.
The financials? It's not exactly to weep, but a return on equity of 8.25% is not a growth stock. True, the company is carrying no debt to speak of, but a low ROE must be taken seriously.
GG pays a small dividend, currently 0.72%.
| sym | bday | blevel | stop | 2-day? |
|---|---|---|---|---|
| GG | feb28 | $47.08 | $45.80 |
Today's high and the July 2008 spike are the resistance levels to the upside, and the stock is trading well above the moving averages I follow, and even higher above the swing low of Jan. 25.
Reversal Levels
- $52.65, +5.1% (july 2008 swing high)
- $50.80, +1.4% (today's high, so far)
- $50.12 --- You are here.
- $45.70, -8.8% (20-day moving average)
- $43.77, -12.7% (50-day moving average)
- $43.42, -13.4% (200-day moving average)
- $39.04, -22.1% (jan. 25 swing low)
Bottom line: For my accounts, I like GG as a short-term play, with the understanding that I'll jackrabbit out at signs of weakness, even before my stops are hit. I opened a bull position in GG on Feb. 28 and added to it today.
Key
- chan: Channel phase, with green for bull trend, red for bear trend and yellow for neutral trend.
- adx: Average direction index location, indicating the strength, or the temperature, of the trend. Orange for 40 or greater, aqua (light blue) for 30 and up but below 40, magenta (light purple) for 20 and up but below 30, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, purple for sunset on the horizon and brown for the earth.)
- traj: Trajectory of the ADX, green for strengthening, red for weakening or yellow for unchanging. Note that if the adx column is orange and the trajectory column is red, then the position must be closed.
- psar: The parabolic sar, either green for bullish or red for bearish.
- bday: Breakout day, the day the price broke through the upper or lower 55-day price line.
- blevel: Breakout level, the price level of the line that was broken through.
- stop: The current stop/loss price. Early in a bull or bear phase, this will be 5¢ below the low or above the high, respectively, on breakout day.
- 2-day?: Marked with an "✔" if the two-day rule is in effect. Under the rule, if the price closes below the breakout level on each of the two days following breakout day, then the position must be exited.
About channel analysis
Read a detailed explanation of my channel analysis method, including trading rules.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
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