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Gold Tries A Daring Move

11/14/03 08:48:49 AM
by Gary Grosschadl

The TSX Gold Index shows a potentially powerful pattern developing.

Security:   $SPTSEGD
Position:   Buy

On November 12, 2003 several gold indices made a strong move up as the gold spot price jumped to a seven year high of $395.50 and closed strongly at $394.20. On an intraday basis the Canadian TSX Gold Index broke into a year high ahead of the more well known XAU Gold Index and the HUI Gold Index.

On a daily chart this Canadian gold index shows a cup with handle breakout pattern very clearly. This is often a strong continuation pattern if it holds. The volume characteristic meets the pattern ideal with its own tracing out of a bowl or cup pattern and then a volume surge with the breakout move.

The TSX Gold Index in a pattern breakout move.
Graphic provided by:
Several indicators also support the bullish premise. The directional movement index (top of the chart) with its ADX and DI components shows bullish promise. The DI lines converged but refused to cross and this often indicates the start of a powerful move. The ADX line (trend strength component) has started its upslope between the DI lines. This ideal arrangement points to growing trend strength provided that the ADX line continues rising.

The MACD or moving average convergence/divergence indicator also has traced out its own cup with handle formation and shows a bullish "skip" off its signal line. The other displayed indicators (RSI - relative strength index and stochastics) also show a bullish bias as they turn up from their often key 50 levels.

What is needed now is confirmation that this move is sustainable. The ideal would be continued upward momentum but a retest of this breakout point should not be ruled out. Failure of this 210 level to hold on a closing basis would negate the bullishness of this continuation pattern.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

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Date: 11/22/03Rank: 5Comment: Useful and practical.

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