We have been noting that some higher profile gold stocks have worse charts than a lot of the smaller ones. This is being reflected in HUI’s pattern. Using KL as an example, I’ve noted that I will not hold it if it makes a lower low to the previous low. As another example, RGLD painted an ugly pattern with a ‘lower high to March’ objective, as we noted back in November.
This is compliments of a subscriber who inquired about a bearish Head & Shoulders pattern on the HUI index. I had not seen it myself (must be slipping). Frankly, I have seen patterns like this often fail, but all too often work out perfectly as well.
It is important to note that it is not an H&S yet, or at least not an active one unless it breaks the neckline, which is serving as a higher low to the previous low support area. If it does not break all’s fine, but if it does break (and prove not to be another quick bear trap whipsaw) the implication would be a higher low to the March low in the 170 area. With our 2nd downside target area of 250-260 that would obviously break the neckline but good and could open up capitulation selling.
Have caution on a break of the neckline and especially on a loss of the previous low at 274.27.