No matter how many correct calls professional analysts make they are always attacked on the one they seemingly got wrong. The knives are out for my attitude towards DRD. It fell like a stone last week and the doomsters have already written it, and me, off as a total melt down situation. One of the classic contrarian aspects of analysis is that every man and his dog become bullish towards market tops. In a similar vein the maximum doom and gloom comments always occur at the bottom of the market. This is the case with DRD. The chat club know-alls have had a field day with the DRD situation. These are the people who are always first to criticize others but do not have the guts to stand on their own two feet and be counted by their continued day to day analyses.
According to these chat experts DRD is about to disappear down one of its own mine shafts. Not on my analysis. There was certainly a massive sell off that I missed. BUT this was the end of an old correction and is NOT the start of the total demise of this share. It was the final C wave panic sell off in the correction that started in January. Now that it is out of the way I expect to see a V type reversal as the gold price hammers through $700 and kicks DRD into some serious upside movement. The correction from January occurred on all gold stocks. This is merely the first corrective wave, the 1-2, in a LONG TERM BULL market in gold stocks. ALL gold stocks will reverse and move through to new recent highs as they progress into wave 3 that MUST take the prices well above their previous January peaks. I am well aware that some gold stocks peaked in May but this was not the true end of the previous upside move, which occurred in January.
The gold shares have been in a correction for the past 11 months. Goldfields formed a diamond while both Anglogold and Harmony mapped out a triangular pattern. Last week’s dip was the final leg of all these patterns and a new major bull trend is about to start with some vigor. DRD had a Zig-Zag pattern with the final panic C wave collapse last week. The key word is “final”. Last week I sent out a report on DRD in which I detailed all the technical aspects of the move. It was the sell off leg of an OLD correction and NOT the start of a melt down.
The Rand has been unbelievably strong and has failed to react to any dollar strength. It appears that positions were being taken in the expectation of a 100 point interest rate hike. As only 50 points were achieved the falling wedge on the Rand is likely to lead to a very sharp catapult to weakness. Get out of the Rand.
The gold price broke above its resistance level against the dollar, but failed to do so against the Euro, Sterling, Yen and Swiss Franc. It has formed a reverse head and shoulders pattern that is completing the right leg. There is something brewing fundamentally that is about to break and push bullion to new highs against all the leading currencies. Take a good look at all the gold and currency charts and watch for the breakout by bullion against all the currencies. Both platinum and palladium are also about to burst upside and copper will not be far behind. The oil price on my data has bottomed and reversed and I look for a new high at around $90 a barrel going into the New Year.
Although the general equity markets appear to be strong the real action will remain with the resource stocks. Stay there.
This is the picture with DRD. It topped in January and has since formed a classic Zig-Zag format in which the recent sell off was the final C wave dip. This completes leg 2 of the main correction. Now we have wave 3 to start and take the share price well above the top of wave 1 in January. Far from looking at the demise of DRD I am looking for NEW HIGHS going forward. This is a massive once a year buy opportunity, not a sell out situation.
Anglogold, over the same period mapped out a triangular pattern. This is a very bullish picture and indicates that the next upside charge is about to take place. Also note that during wave 1 the RSI made new highs along with the share price. This indicates a stable long term bull market.
Also note that the same picture is shown for DRD in the above chart. Its RSI did not give any divergence sell signal again indicating a stable LONG TERM BULL market.
Goldfields, over the same time frame exhibited the same RSI features. The oscillator mirrored all the new highs of the share price and indicates a stable long term bull market. The diamond pattern has formed co-incident with the triangle on Anglogold and the Zig-Zag on DRD. Thus all gold shares have been in the same 1-2 correction but have mapped it out in different ways. When one breaks out the whole lot will signal a major trend reversal and upside break, and that includes DRD!!!!!!!!!
Harmony, over the same period mapped out a flat top triangle. The critical R120 level remains the major breakout point. A move above that will trigger not only the new upside charge for Harmony but for ALL gold shares, and that includes DRD.
This is a MASSIVE BULL market brewing for ALL gold shares.
Bullion broke above the black trend line and the main resistance in red at $625. It has since pulled back to test the support at $625. This dip has formed the right shoulder of a potential reverse head and shoulders pattern with a neckline at $650. A break above this will trigger a move to at least $720. This could be a very sharp move and dynamic two months for bullion.
Bullion in Euros is shown. The price did not break above the blue resistance level. It has formed a right shoulder of a reverse head and shoulders picture and is ready for an upside charge. This same picture is visible on gold in Sterling, Swiss Francs and Yen.
A break above the neckline will indicate a new set of negative fundamentals that will push the gold price to again outperform all the major currencies in a strong bull market.
The Palladium price has formed a huge triangular pattern. I detailed this in the last issue. A break above $332 will trigger a new move to break above the recent May high. This is a major bull market.
The platinum price has made a falling wedge pattern that is about to break upside and take the metal to new all time highs. This is yet another major bull market picure.
The Copper price has formed a triangular pattern. It needs a break above $7500 to kick start the next upside charge.
The bottom line is that all metal prices and oil are ready for a seriously dynamic lift off out of patterns that have been in formation since mid year. This is likely to lead to some huge upside moves, especially if the gold price breaks upside against the Euro and other major currencies.
Do not underestimate the latent power of this market!!
The Euro / $ broke strongly above the resistance at E1.30. There was a potential head and shoulders top pattern This has failed but the count remains. The distance from the top to the neckline is added onto the top for a target level of E1.56. OUCH. This is likely to occur in late 2007. But the implications for a very weak dollar are there.
The $ / Rand and its falling wedge were intact until today. Many punters had backed a 100 point rate increase and bough the Rand. As only 50 points were forthcoming this has put the skids under the Rand bulls. The current price of R7.06 is ready to reverse out of this dangerous pattern and a sharp move to weakness is likely. This will have a very positive impact on the gold shares.
The Dow has remains with its potential sell divergence as both the MACD and RSI have refused to follow the index to its recent new highs. This effect is evident on all the main US indexes as well as most of the leading European indexes. It is a warning shot that this is not a global buying area for general equities. I must look for a period of weakness following the four month almost uninterrupted bull run.
Gold Action is a fortnightly commentary on global gold markets produced by Dr. Clive Roffey who has been a leading independent commentator on gold markets since 1969.
Dr. Clive Roffey, Gold Action
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