Barrick Gold Glitters Enough to Draw Buyers

 | Aug 29, 2017 | 9:20 AM EDT
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Barrick Gold Corp. (ABX) joined the precious metals rally yesterday as it broke out over the highs of May and early August. A four-month base pattern before the current tense international backdrop can support further gains, so let's take a look how high this rally can travel and what to risk.

In this daily bar chart of ABX, below, we can see that prices made a low back in December followed by a fairly strong rally into February. Prices made a small double top in February and April. After this top, prices corrected lower but then made a saucer-like recovery from May to date.

The moving average signals were not very successful the past 12 months as prices crossed above and below the average lines. From late July the picture improved, with ABX closing above the 50-day line and the slope turning positive in early August. Prices tested the flat 200-day line for much of August but closed above last week. From the December price low the daily On-Balance-Volume (OBV) has moved up and down with the price action, but overall it has made higher lows even when prices made lower lows into July. This stronger performance by the OBV line suggests that investors have been accumulating shares of ABX for several months. The Moving Average Convergence Divergence (MACD) oscillator crossed to the upside in early May for a cover-shorts buy signal and an outright go-long signal in late July when it moved above the zero line.

In this weekly bar chart of ABX, below, we can see that prices are now above the rising 40-week moving average line. There is some resistance on the chart around $20-$21 and more around $22-$23. The weekly OBV line has moved sideways since May 2016, but the past two months show the potential start of a new rising trend. The weekly MACD oscillator has signaled a cover-shorts buy signal.

In this Point and Figure chart of ABX, below, we can see the breakout from a "double top" at $17.42 and a nearby price target of $19.12.

Bottom line: When we go back and look at the charts, price action, volume and indicators on ABX, we can see accumulation ahead of today's current events. Aggressive traders can approach ABX from the long side risking a close back below $16.50.

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