The proverbial "sweet spot" of the momentum market in precious metals stocks in recent weeks is upon us, and the XAU index will greatly benefit from this on its way to re-test this year's previous high.
Nothing stands in the way of a momentum market once it has been firmly established and really gets going, and this coming week nothing will stand in the way of the gold stocks from climbing higher. It's truly a gold and silver stock trader's delight to witness high-impact momentum after taking several months to gather. The September-October rally in precious metals stocks is a payoff for the doldrums the sector suffered through earlier this year.
The XAU has now come face-to-face with pivotal resistance at 105. This level should be overcome in the next few days, with 110-115 the next major upside target. The rising 10-week moving average reflects this continued upside momentum in the XAU's favor (see weekly chart below), and this moving average is especially dominant this year since this is the year of the 10-year cycle bottom.
Here is a short list of stocks that I think will continue to benefit from the upside momentum in coming days: Gammon Lake Resource (GAM:TSX). It shows positive divergence in the weekly stochastics indicator and it should see higher levels in the immediate-term as the XAU nears its previous high.
Placer Dome (PDG) will likely try to reach its $23 upside target based on the measuring implication of the inverse H&S pattern in its weekly chart. PDG is definitely a momentum stock among the golds.
Coeur d'Alene (CDE) will likely continue along its parabolic up-curve in the coming week, seeking higher highs as it enjoys the benefit of the momentum rally in the PM sector. From the standpoint of Parabolic Analysis, the bowl in CDE shows excellent form.
Goldcorp Inc. (GG) also shows excellent form from a chart perspective and should make higher highs in coming days as a beneficiary to the gold stock sector's upside momentum "sweet spot." It also has sported relative strength compared with the broad market since the spring of this year. That shows that GG has been in strong hands.
Very soon the broad stock market will begin its own momentum market for bullish traders to enjoy and will pick up where the gold stocks have left off. But for now the spotlight is on the gold and silver stock sectors, which have definitely earned it!