DROOY

[puenthouse]

no input, just loved the 5 day chart on this bad boy, oh and by the way bought at the high of the day, so it did not end to prett'y

[metro]

Saffey,

you use a signature " Pigs get slaughtered" on your posts - so you know the answer to your question but we will take a look.

DROOY started a downtrend in early 2004 and it went down for 16 months until the uptrend started 4 months ago. Note the degree of slope of the downtrend - it is not drastic but quite normal and consistent and look at the 4-month old uptrend - it is almost exactly the same slope as the downtrend. If it could stay the same for the next 12 months then DROOY would be back to $4 or a 400% gain from its recent $1 price. A 400% gain in a year would be great. But the stock price broek much to far away form the uptrend line so is being pulled back a bit. Pullbacks or time will bring things more into line.

Also note that the stock broke out of the downtrend about 10 days ago at $1.10 and rallied 50% in that short time. Movements like that are not sustainable in the short run so need backing and filling and there is nothing negative about this at all as it is in fact very desirable. The top candle was getting above the top Bollinger band and that cannot last. With gold stocks it is particularly beneficial to buy on weakness as long as the general trend is up.




Here is the same chart on a smaller time scale. Note that from the break out and also the break above the the 200-day EMA the stock ran to its first target so a pullback is to be expected. Typically when gold is running the stocks can pullback to the 9-day EMA as this one did 5 days ago - those are good placed to make buys as the risk is low (you can sell soon if they fail) and the gains will be more.

This stock has left a gap which personally I hate unless they were created by some great news. The gap however may not fill but note that the 38% retrace is at $1.35 and gap is at  $1.33 so it may. Also note that the 9-day EMA is conveniently at $1.34.

Another thing to note is that the 200-day EMA is getting closer to crossing below the 50-day EMA which would be very bullish.




As I have shown in other posts, until indicators change it looks very much like gold stocks will now continue their bull market rally for the next several months or so. If true it is a time when you can hold positions for months and if you are a nervous type just not look at them on a daily basis.

Pick several gold and or silver stocks and if long term then make buys at different points so you can add if they pull back. If the longer term indicators for gold reverse then obviously you exit.  If you like to trade then one way of to keep part of your positions long term and trade part. It is called trading around a core.

Gold stocks do not trade like "normal" stocks as they have so many more influences and international events and reasons why they move how they do but the recent break out on the ratio charts and the price of gold and many other factors point to an extended rally at the moment. The one thing which is a bit unusual is as of last week the commercial trades still had rather large short positions and they are generally correct but maybe they are covering on this pullback.

Also note the the two main Palladium stocks also had pullback after break outs SWC especially had a strong reversal.



I like this stock and sold yesterday as it was way above the top B band and had strong volume after a 2 week run. Will look to buy this one back while watching the price of palladium. The other stock is PAL and its next target and actually its break out will be about $6 and the 200-day EMA

[Michael]

I was a little concerned about the action in the stock today.  HOD was 1.66, thenat the close the stock lost all its gains with significant volume.

Not sure if that's a good sign. Anyone else have any input?

Thanks
Saffey.

Hi Saffey,

I agree with Metro's assesment. I am long term very bullish on Gold and own a couple of Gold stocks already.

I am going to buy at least one more during the coming weeks. Short term I do however feel that we are heading for a small correction. Several indicators seems to show that we are in overbought territory.

Here is a very useful article about the technical situation: http://futures.fxstreet.com/Futures/content/100300/content.asp?menu=review&dia=2092005

I am not selling but the only Gold stock I would buy right now is RANGE, as this stock short term is not driven by the Gold price.

[David Randolph]

Great analysis from metro, thanks 

I basically agree with him, but I don't feel DROOY or other gold stocks will take much time correcting at this stage. I believe it is riskier to be out than to be in these gold stocks (that is, if you're looking to have above average performance as I do).

DROOY may come down now over the short term, candlesticks do suggest that (but pay attention to the volume, it is very high, the stock is attracting a lot of interest) but it also may push higher again, beyond what everyone is expecting at this point. If the US Dollar starts appreciating as I think it will against the Rand and other currencies, suddenly DROOY should be trading above $5 and not close to $1.5. Gold is moving higher and that trend will probably persist, so there's only way for gold stocks, and that's up !

Of course, as metro accurately said, the stock was up 50% in just 10 trading days, so naturally there was some profit taking yesterday, but I don't think it will last long, a macroeconomic shift has occurred at the gold market and people need to buy gold shares, now !

[metro]

AUY is an example of one where waiting a bit gives a better tentry price - a nice break out on strong volume and one that looks good long term. But selling some when it was over extended and totally above the top band and buying back near support give 50 cents more eventual profit if it does indeed go back up and it also saves on losses if something unforeseen happens.

This is one I stared buying back today - if I am early I do not care to much as the 9-day is just below that this price is still 65 cents better then the recent high. Also I often do not buy my full amount at one time so can average up or down and it forces me to pay attention to the stock as each stock does have its own trading style.

This note is more for traders rather then folks who like to buy a position and hold it.

[shawFund]

Hi, David:

  I just made a donation through my PayPal account. Please verify to make sure you do have received it.

I started my summer vacation 10 days ago and will be back on board October 1.

Good service and want to be part of it.

[usedcasting]

Hopefully just filling the gap.

Good Trading all!

u-

[David Randolph]

Hi, David:

  I just made a donation through my PayPal account. Please verify to make sure you do have received it.

I started my summer vacation 10 days ago and will be back on board October 1.

Good service and want to be part of it.

I think so, but I don't know if it was you because I don't know your name and you didn't provide your nickname on 3 SOF. Please send an e-mail to Ramsburg telling your name shawFund. Thank you and you're welcome to 3 SOF Premium Service 

Considering DROOY, I must admit I was wrong on the short term and people who patiently waited for a correction were right. The entire gold sector dived yesterday, but DROOY went down the most, almost 9% 

This was probably due to the gains of the South African Rand against the US Dollar, as you can check on the chart below. I would like to see the USD holding the 6.30 level and I believe that's what ultimately happen, since I'm bullish on the USD against other currencies worldwide.

DROOY went down and closed a gap that it left open on the way up. I will continue holding the stock.

[valueseeker]

Hi Dave,

Any shor term prediction on DROOY?

Thanks.

[David Randolph]

Considering the volume and the close of the gap I think a short term bottom is in, but I can't be sure about that. I still need to draw an ascending trendline for DROOY, for now the chart is still in the early stages of an ascending phase.

Now that you're talking I do see two ascending trendlines, TL1 and TL2, and TL2 indeed has 3 touches which validate the trendline. The slope is an healthy $0.024.

Good luck

[David Randolph]

Wow, DROOY was up 15% today, so we sure have a valid ascending trendline in place. That's always a good thing, because it makes technical analysis much more simple and clear for everyone to see it.

I find that Gold is the only game in town. I chase performance, I want the 3 Stocks on Fire Portfolio to grow every month, so I will probably need more gold in the portfolio. Other sectors are just bearish now, so everyone will rush to pick some shiny metal 

DROOY is doing just fine, of course I will continue to hold it.

[valueseeker]

Hi David,

Thanks for your reply. I didn't get the chance to see it in time but I bought anyways. Holding VPHM, AOB, SVA, RITA, HOM, DROOY, and BRVO from 3SF. Your picks are amazing! Thanks again.

Gold seems to be doing well and likely continue to do well. The other game in town is the energy stocks, and I have been holding natural gas stocks CHK and KCS since Katrina and expect them to continuously do well due to Rita and coming heating season.

-Valueseeker

[David Randolph]

DROOY went down today but I'm not worried. TL2 for tomorrow will be coming at $1.40 for anyone interested in buying at support. I will continue holding DROOY.

[David Randolph]

The Dollar rose against the Rand on Friday and the cross seems to be developing an inverse H&S pattern, which would mean a medium to long term bottom for the USD versus the South African currency.

Those would be terrific news for DROOY, since the company would be making more money from the rising gold price and also from the rising dollar (revenues in Rands is what matters for DROOY, the stock listed on the Nasdaq generally follows the stock traded on the South African exchange).

Anyway my patience is running low at this moment. I'm quite bearish on the general market and don't want to be overexposed, whatever the sector is. I believe gold stocks will be a safe haven sector and that they will rise over the short term, but the market has to agree with me !

And the market will disagree with my assessment if the stock closes below TL2, which for tomorrow will stand at $1.42. If this situation happens, I'll take a small loss and move on, the first and more important trading rule is to preserve capital.

[stocky]

Another excellent analysis, applaud. Just hoping that 3SF T-shirts include XXL size, for thats mine and most of the average californian trader size [that luv for slammers and fries would add up somewhere  ]