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Author: Money Morning Australia
Share Bears Bring out Gold Bulls
As indicated yesterday, many indicators argue for a strong rebound of the
Bullion, in the current context of financial crisis and uncertain business
climate. Gold price soared yesterday, the biggest gain ever posted in one day,
as the credit market turmoil convinces investors to pull their money out from
equities and to put it back in safe-haven assets. Yesterday SGX jumped by 22.54%
and LGL bounced 15.89%.
As same causes create same consequences, a further momentum is expected for
LGL.
Several signals argue also for a positive development.
The stock actually lost 61% of its value between the historical high posted
in last March, at $4.39 (well the real historical high had been posted in
October 2007 at $4.45), and the recent low posted last week (at $1.6950). The
stock has been obviously oversold and, as it has already bounced back
impressively, a large retracement is more than likely.
The MACD just triggered a bullish signal yesterday, as it crossed above its
signal line. So did the Relative Strength Index, which has quit the oversold
area and has been soaring for a week now. The On Balance volume indicator (OBV)
provides a running total of volume and shows whether this volume is flowing in
or out of a given stock. Here the OBV has also clearly bottomed and has turned
upward: money is flowing back into the stock. Once again, if both price and
volume move on the upside, it's a good sign that a bullish momentum is building
up, and that a positive trend may be possible.
A significant retracement of the recent decline is likely. Yesterday the
price closed at $2.48, well above the 23.6% Fibonacci ratio. The next objectives
are therefore $2.7 then $3.1 (the 38.2% and 50% retracement ratios).
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