Gains in the gold stock?

However, I did write a piece (not so long ago) about how gold stocks are for “trading” rather than investing.

So just to be clear, if I am to call this an “investment” it most certainly is going to be a short-term one.

I have spotted one of the most bullish technical trading patterns on the short-term chart of local gold miner Goldfields.

It’s taken this pattern since January last year to develop and this stock is on the verge of forming a massive “cup and handle” bullish break out pattern.

In 2015, the collapse of gold stocks and, last year, saw the “rounding bottom” form as the price tried to establish a low.

Goldfields spent the whole of last year making its gradual ascent which has resulted in the formation of the brim of the “cup” in February. The pullback and subsequent recovery which followed the “double top” high has almost succeeded in forming the “handle” of this teacup.

This is generally regarded as a bullish technical pattern.

There is still a lot of uncertainty around financial markets around the world and this is very supportive of a gold trade.

In fact, on the day of the UK referendum results, the gold price spiked over $80 in a matter of hours.

That means those Brexit buyers still need the price to go up.

A weaker Rand and rising gold price should be the perfect scenario for our gold stocks to do well in the near term.

So how would I trade this?

The recent Brexit has resulted in a surge in gold counters and I believe this to be the start of gold’s first bull break-out in years.

In terms of Goldfields’ technical pattern, this is one of those times where you need to buy the high.

What I am looking for here is a sharp move above the top of the rim and handle of this teacup.

I am regarding a close above R72 the signal that the break-out is coming.

After that, I believe the share can bought anywhere near or above R70 (psychological level).

I expect Goldfields to close the price gap that it formed during the gold capitulation we saw in March 2012.

I peg that at R90 to R96 per share. That relates to around a 33 per cent rally.

I’m no gold bug but if this cup and handle comes to fruition, I most certainly won’t be turning my nose at this kind of gain.

Benoni resident Roberto Pietropaolo, or Robby P, as he is known in the financial markets, is committed to educate you on financial wellness, investing, and general money matters. He works for Vunani Private Clients, as a trader, investor, mentor and tutor. He specialises in trading the short-term derivatives market and longer-term equity or share market.

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Saving money not always the smartest idea

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