For some mining stocks, the precious metals rally did not appear out of nowhere. Randgold Resouces (GOLD) began its bottom back in July/September with more serious accumulation becoming evident in November.
In this chart of GOLD, above, we can see the rising On-Balance-Volume (OBV) line showing the strong buying interest and accumulation. A rising OBV line means there is greater volume traded on days when the stock closed higher -- this is a sign that buyers are willing to lift offers to buy. In January, GOLD rallied above its 50-day and 200-day moving averages. In early February, we got to see what Japanese chartists call a golden cross as the 50-day average climbed above the slower 200-day moving average. This buy signal has been around a long time. Prices have shot higher and have gotten what traders call "overbought," but GOLD made a high-level sideways consolidation of its gains instead of a downward profit-taking reaction. This too is another sign of strength as traders don't wait for a pullback to buy.
This three-year weekly chart, above, shows that GOLD was stuck in a sideways range, but recently broke out of the top of the range at $90. Note the strong OBV line since August on this weekly time frame. Prices are above the 40-week moving average and the slope of this key average is positive. Interestingly, there is no bearish divergence between the price action and the momentum study.
We needed to draw on even more price history to get a sense of where GOLD was headed, see the chart above. This five-year weekly chart shows that the OBV line has broken out to a new high over its early 2015 peak before prices. The OBV can be a coincident indicator and also a leading indicator at times -- here is has been leading. There are no problems with momentum as the rally is not slowing down. We also want to point out that there is no meaningful resistance on GOLD until we get back up to the $120 area. If we take the height of this three-year bottom pattern ($30) and add it to the breakout at $90 we get $120 as our initial upside target.