Tuesday, September 3, 2013

Higher Gold Prices- A Technical Look At Royal Gold

The below chart shows the latest price trend for Royal Gold (ticker RGLD). This chart is constructive chart if you are bullish on gold and/or gold equities.

In one sense, the stock acting probably as it should. After rallying nearly $30 off the June/July lows, the stock began to trade into the March/April downdraft swing point. The share price subsequently sold off, as you would expect if weak hands were selling out hoping to break even after the stock fell 40% in the course of a few months. Now here is the interesting part. Notice how the downside volume after the stock tested the March/April swing point continues to come in under the August 12 trading day levels where 1.7 million shares changed hands. This level's importance comes from the break away from the previous consolidation trend between April and June. That's important. If the stock continues to hold this level (which I surmise it will considering the momentum in the stock, positive timing model indicators, and seasonal factors), the chances the stock continues its upward march are increased. In fact, I would not rule out a $20 point upside to about the $75 to $80 ceiling. This is as the the accumulation/distribution line remains positive, the MACD remains in an uptrend, and the RSI/stochastic alleviate overbought conditions.

Examining RGLD can provide greater insight into the potential performance for all gold equities and the broader gold market. As a study I performed shows, gold equities tend to lead the performance of gold. RGLD's business model renders it the most leveraged company to changes in gold prices relative to other miners and comparable companies. The stock price of RGLD indicating higher prices is a positive indicator for the gold complex as a whole. 

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