In today’s report I would like to take a good hard unbiased look at some of the big cap precious metals stocks that have been in rally mode since the first of June. This rally has been pretty impressive so far but is it the real thing?
Yesterday I showed you some charts on the ARCA Gold Miners Index (GDM) going from the 60 minute short term look to a year and a half look that showed the two big patterns we have in place right now, the falling flag and the inverse H&S bottom. Today I would like to follow up with some big cap PM stocks, on the 60 minute chart and the bigger long term charts, that have their own respective year-long trading ranges.
First let's look at the 60 minute chart of the GDM that I' ve already showed, that had a H&S top forming. Yesterday GDM did some more work on the right shoulder that is making the H&S top a little more symmetrical now. Keep this H&S top in your mind when we look at some of the other big cap PM stocks in a bit.
Below is the 2 year weekly chart that shows the blue parallel downtrend channel that we’ve been following for some time now. These are the two chart patterns I’m going to show you today, the little H&S top on the 60 minute charts and this year-long blue trading range on the longer term big cap PM charts.
The combination of where these little H&S tops lie in relation to the top rail of these big one year trading ranges may be be giving us a big clue that we are just at the top of this one year trading range, which may continue for who-knows-how-much longer. I do know everyone is super bullish right now on the precious metals complex, so maybe now might be a good time to go against the crowd. After we look at some of the more important big cap precious stocks you can make up your own mind.
First let's look at the biggest of the big cap PM stocks, Barrick Gold Corporation (NYSE:ABX). The 2 hour chart below shows a potential H&S top that has yet to break below the neckline. Keep on eye on where this potential H&S top resides on the longer term chart, just below this short term look:
Below is the daily chart for ABX that shows our little H&S top has formed just below the bottom rail of the big blue bearish rising wedge as a backtest so far.
Now the weekly chart that shows our little H&S top forming at the bottom rail of the bearish rising wedge as the backtest. You can see how critical this area is right here on the biggest PM stock there is.
Let's now look at the star performer for this rally off the June low, Royal Gold Inc. (NASDAQ:RGLD).
Below is a daily look at RGLD that shows its big, one-year trading range is a rising wedge formation. You can’t really see the small H&S top but it’s there, just below the top rail at reversal point #4.
Below is a weekly chart that shows the rising wedge with our little H&S top forming just below the top blue rail at reversal point #4.
I have to show you the monthly chart for RGLD as it ties all the timeframes together. As you can see, this is the third backtest to the bottom rail of the long term black rising wedge. How critical is this backtest?
Franco-Nevada Corporation (NYSE:FNV) has been another high flyer during this June rally.
The weekly chart of FNV looks a lot like RGLD, which shows a very long-term, black uptrend channel and now another backtest from the underside making it the fourth at this point.
Silver Wheaton Corp (NYSE:SLW) has been another star performer during the June rally.
SLW’s trading range has been a triangle formation. As you can see, it had a false breakout of the bottom rail and then reversed direction and rallied all the way back up to the top blue rail.
Below is the daily chart that shows Randgold Resources' (NASDAQ:GOLD) expanding triangle and our little H&S top at reversal point #4.
Here's a long-term look at Randgold:
Let's look at one more big cap PM stock, Goldcorp Inc. (NYSE:GG) and its 2 hour bar chart.
Below is a daily chart for GG that shows its black falling flag at its one year trading range.
The weekly chart really puts the blue falling flag into perspective:
This last chart for GG shows its entire history going all the way back to 1994. You can see it's a classic bull market that ended with that massive H&S top.
This is where we stand today with regard to the big cap precious metals stocks. Note thatt those little H&S tops on the two hour charts weren’t there two days ago. They started to show themselves Tuesday with some follow-up work on the right shoulder yesterday.They still haven’t broken down yet, which means they are still incomplete patterns.
The charts I've shown in this post, on the bigger, one-year trading ranges, indicate the top rails are still hot and should be respected, even though there were many different one-year congestion zones. Nobody knows with 100% certainty how things will evolve from here, but there is a lot of evidence that this June rally could just be another reaction within the one year trading ranges exhibited by most of the PM stocks.
We need to be prepared for whatever the markets throw our way. If these small H&S tops start to break down, then we will need to act accordingly. The first thing will be to exit the Junior Portfolio stocks. The big cap precious metals stocks are truly at an inflection point right here and now, which we can take advantage of with just a little more information. Keep an open mind and let's see what kind of hand the market deals us.
NOTE: Just so you know I’m not biased, here is the possible inverse H&S bottom everyone and their brother is now seeing. May the best pattern win.
