Home
Mike Swanson's picture

Gold Primed for November Rally - Mike Swanson (10/30/06)

Submitted by Mike Swanson on Mon, 2006-10-30 09:18.


Last week gold stocks broke out of their downtrend resistance channel as the XAU popped above the 130 level. The market tipped us off that a bullish move was in making, because gold stocks outperformed the metal last Monday and Tuesday before breaking out. In fact gold fell over 20 points on Monday and Tuesday while gold stocks went up. It's easy to forget that this happened since it was a week ago, but it was a key event in the development of this new gold stock uptrend. Remember gold stocks tend to lead the metal so if they trade up while the metal drops its a very bullish sign. As I've written before, I believe we are on track to see the XAU go up to the 145-150 area by Thanksgiving.

What is more, according to the most recent commitment of traders report, the gunslingers - the small speculators that are usually on the wrong side of the market - actually shorted 1,315 gold futures contracts and liquidated 3,894 contracts while the commercials initiated 1,213 new long positions and covered 1,416 short positions. The dumb money is showing us once again why its earned its reputation.

Gold hasn't broken out yet though. Not yet that is. Resistance on gold is right at 600 and gold is consolidating right below this level. A close above 600 will make gold close above its resistance downtrend line that has held it down since last May and should lead to a quick move up to at least the 646 level, and most likely to 665 by Thanksgiving.


At the same time that gold appears poised to breakout the dollar is on the verge of breaking support and making a move down to its May lows. On Friday the US government released GDP figures that show a surprising deceleration in economic growth. The dollar traded down as a result. A close below Friday's lows on the dollar will cause it to close below its support trendline, which has held it in place since May. This is important for gold, because gold tends to trade opposite to the dollar.

We are looking ahead to a wonderful month for gold and gold stocks.

Interview with Hans Rasmussen the COO Of Ealgecrest Explorations

Eaglecrest trades on the Vancouver stock exchange under the symbol EEL

WSW Power Investor for 10/30/06

»


Sign Up Below to My Free Weekly Newsletter

Hello. My name is Mike Swanson. I’m the best-selling author of the book Strategic Stock Trading. In a former life I used to run a hedge fund from 2003 to 2006 that generated a return of over 78% during that time frame. In fact it was ranked in the top 35 out of 5,000 hedge funds in 2005.

After I retired from the hedge fund world I setup this website and blog. If you sign up for my free weekly email list below I’ll send you an update on average about once a week on my views of the current stock market trends and share with you actionable investment ideas.

Now I cannot promise you that every stock I find will go up in value. I can’t promise you endless 100% returns as others claim they do and as all the disclaimers say past performance does not necessarily predict future performance and you can lose all of your money in the stock market.

This is reality.

What I can promise you is my dedication to doing the best I can for you.

You see the key to making money over the long-run in the stock market is to manage your risk. Once you sign up to my newsletter I’ll send you a series of educational videos and writings showing you how I use stop-loss orders to cut any potential losses and how I use my two fold formula system that combines fundamental and technical analysis to pick stocks. My goal is to risk one dollar to try to make at least three dollars in my trades by looking for stocks that are priced cheaply on a valuation basis, have high earnings growth, and have excellent chart patterns.

So join my list below and let me help guide you on your journey in the stock market.