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Agnico-Eagle Flying Higher

12/27/05 08:43:55 AM
by Gary Grosschadl

This unhedged intermediate-sized gold producer is based in one of the few mining-friendly, politically risk-free areas of the world.

Security:   AEM
Position:   N/A

As this monthly chart (Figure 1) shows, a breakout on good volume is under way. Of course, on the shorter-term daily and weekly charts, this has been an ongoing event. When a long-term chart confirms the move, however, a bigger play is indicated.

On this multiyear chart from 1993, a large symmetrical triangle is shown and a breakout is in progress. Should this move continue, the upside measure can be equal to the widest part of the triangle, roughly $14 (18-4). This hints at a possible move to $29 (15+14).

FIGURE 1: AEM. Here's a long-term monthly chart of Canadian gold producer Agnico-Eagle Mines.
Graphic provided by:
Several indicators share this bold view. At the top of the chart, the directional movement indicator with its three components shows bullish promise. Note the resemblance to back in 2001, when the average directional index (ADX) upticked from below 20 to a peak of 40. The indicators below the chart all show bulish strength above key areas. The moving average convergence/divergence (MACD) indicator depicts a bullish crossover above the zero line, pointing to a bullish uptrend. Meanwhile, the relative strength index (RSI) and the stochastics oscillator both show a move above the often-key area of 50.

A move to the bold target of $29 would most likely be accompanied by continuing strength in the price of gold. This has already seen a spike to $540. Can this be eclipsed?

Gary Grosschadl

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

E-mail address:

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