NFTRH; Gold Stock Pullback Strategy

The gold stock sector is pulling back today after HUI made a new recovery high of 242.53, just below our anticipated strong resistance zone of 245 to 250.  Hopefully, traders have been taking some profit.  What comes next for gold stock players is a game plan…

  • If HUI has topped out (not a given, as this could be another pause in the initial burst upward, as last Friday was) it would be time to evaluate buy back levels.
  • As for the HUI itself, these would correlate to the confluence of support noted in NFTRH 296 by daily and weekly supports.  The best support – if a correction is strong enough – is in the 220 to 225 area.
  • Individual items may bounce around out of sync with HUI.  As an example and speaking for myself, AKG – a stock that was very much on my radar – dropped hard enough today to take a starter position.  After taking more profits this week, I was low on holdings.  Look for heavy chart support for any items you may favor.
  • As an example, RIOM, an IKN favorite has dropped hard today to 2.20.  It has heavy support coming into play at around 2 bucks.  That also happens to be around a 50% retrace of its entire rally.  So a RIOM bull who wants more or wants to buy back could be buying around there.  As for me, I never sold it but having taken profits elsewhere helps me take its drop in stride.
  • The bigger point is that with the bottoming pattern having made significant strides toward being a ‘good’ one, we should be aware that if it is a good pattern, we are on its right (i.e. completing) side, not at its beginning (last summer) or stuck somewhere in the muck of its middle.
  • So with all due risk management going forward, gold stock players might ease into a buy the pullbacks regimen because if and when the day comes that the pattern breaks out it has the potential to go a long way.
  • The refined plan is the result of the technical activity over the last couple of weeks.  I am not sold on the fundamentals yet, but again there is a leap of faith that the TA is forecasting improvements there.  We will remain constructive only as long as the TA says to remain constructive.
  • As for current fundamentals, it appears that an initial rumbling of inflation expectations and views that the Fed may be falling behind the curve are driving the precious metals.  Later we will look for signs of economic hiccups, which would be a better driver in my opinion.