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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).
* 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
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