There are two patterns I'm watching very closely in here on the HUI which will be a proxy for the rest of the PM stock indexes. This first chart is daily chart which shows the three small consolidation patterns that have formed since the January low. The top pattern basically completed its fourth reversal point today which is an expanding falling wedge. One of two things will most likely happen tomorrow. If this is the correct consolidation pattern then we will most likely see a breakout gap above the top rail which should lead to the next impulse move up. The second scenario would be to see the top rail hold resistance and a move down to the bottom rail of the expanding falling wedge where the 38% retrace would come into play around the 183 area. This pattern is complete except for the breakout.

HUI Gold Bugs Index Daily Chart

Below is another daily chart we've been following which shows a possible bigger consolidation area forming with the second reversal point coming into play at the top of the trading range. If and that is a big if, if the top of the trading range does hold resistance then we'll need to see one more decline toward the bottom of the trading range to complete the 3rd reversal point, which would then setup the all important area to begin the fourth reversal point back up to the top of the trading range to complete whatever consolidation pattern develops. We won't know what pattern we have until we have the four reversal points in place. As bullish as this sector seems right now it's hard to imagine that big gap getting filled but it's a possibility. There are no laws though that says the gap has to get filled, it's just that most of the time they do get filled at some point.

HUI Gold Bugs Index Daily Chart 2

This next daily chart for the HUI would be the most bullish pattern we could ask for. The initial rally that began at the January low to the April high could be called a flag pole. Whatever consolidation pattern we get starting from the April high would be called the flag. The blue trendlines shows the two most likely patterns that may form the flag. I've also added a horizontal dashed line at the top and bottom of the trading range that would show a rectangle. So there is a possible triangle, falling flag or rectangle that could form the flag. The most important thing to watch right now is what happens up here at the top of the trading range.The blue arrows would measure the halfway point from where ever the last reversal point takes place in the bull flag. The higher the last reversal point the higher the price objective.

If the HUI gaps up big tomorrow morning then the first chart we looked at, the expanding falling wedge, will most likely be the next consolidation pattern that leads the next impulse move up. The bottom line is to be prepared for either scenarios.

HUI Gold Bugs Index Daily Chart 3

I've been watching the $CDNX for clues also, which may have given us a big one today. I wanted to wait for the end of the day to see if the price action held above the top rail of its small blue rising wedge. It did and closed at the high for the day. The blue bullish rising wedge would equate to the first pattern we looked at on the HUI which was the falling expand wedge.The blue arrows measures the first impulse move up that was separated by the bullish expanding rising wedge as the halfway pattern. The red arrows measures the second impulse move up if the blue bullish rising wedge works out as a halfway pattern. The rally would probably last four to five weeks before the price objectives are reached. Again have your favorite PM stocks ready to go in case this scenario plays out.

S&P/TSX Venture Composite Index Daily Chart

All the best

Gary (for Rambus Chartology)

http://rambus1.com

FREE TRIAL - http://rambus1.com/?page_id=10

© 2016 Copyright Rambus- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Rambus Chartology Archive

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.