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Two Gold Stocks, Two Breakouts, And Two 52-Week Highs

10/07/04 10:24:13 AM
by Arthur Hill

Gold stocks have shown good strength over the last few weeks and months, but two in particular stand out from the crowd.

Security:   GLG, PDG
Position:   Buy

XAU has been rising since May and recently recorded a five-month high. Despite the sustained advance, this gold and silver index is still well below its January high. This is also true for most gold stocks -- except for two.



Glamis Gold and Placer Dome recently broke key resistance levels and recorded new 52-week highs. Relative to the group, these stocks are outperforming. In addition, the recent breakouts point to higher prices in the coming weeks and months.

First up is Glamis Gold (GDG). The stock advanced from 1.25 (October 2000) to 18.20 (December 2003) in a run that would make most tech stocks proud a few years back. Since first surpassing 18 in November 2003, the stock has consolidated over the last 12 months with a large inverse head-and-shoulders.



Figure 1: Glamis Gold
Graphic provided by: MetaStock.
 
There are two types of head-and-shoulders patterns: continuation and reversal. Because the prior move was up and the pattern is inverted, it is a continuation head-and-shoulders.

Back to the GDG, the stock broke neckline resistance in late September and recorded a 52-week high in October. The breakout is bullish and the upside target is to 24.5 (the distance from the neckline to head is added to the breakout for a target).

Next up is Placer Dome (PDG), which also sports an inverted head-and-shoulders pattern of the continuation variety. PDG advanced from 7.25 (Ocober 2000) to 18.69 (December 2003). The advance was not as extraordinary as that seen in Glamis Gold, but impressive all the same.



Figure 2: Placer Dome. This stock sports an inverted head-and-shoulders pattern of the continuation variety.



Since peaking in late 2003, the stock formed a large inverted head-and-shoulders pattern. PDG broke neckline resistance with a strong advance in August, consolidated and then continued higher in September. Late September volume was above average and the upside target is to around 22.



With the stock already trading around 20, it may be prudent to wait for a pullback, possibly into the 17-18 area or support from broken resistance.





Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
Company: TDTrader.com
Address: Willem Geetsstraat 17
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Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

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