Friday, November 21, 2008

3 Pivots - Base & Break - Barrick Gold Corporation (USA) (Public, NYSE:ABX)

Gold is the only sector I track which had manged to hold above the Oct. lows after yesterday's market drubbing. Today it was strong out of the gate, probably as safe haven as more fear comes into the broad markets.

ABX gapped up on the open above the 5 DMA (orange) and into the 3 pivot base at resistance. I drilled down for a close look at the 1 minute timeframe as price developed a bullish pennant setting up a a low risk long entry. I milked this one all day with a second entry in the afternoon following a shallow pullback and a mini base.

I sort my watchlist on % change and focus on the outliers. Not too interested in shorting at this point except financials. ABX and AEM were number 1 and 2 respectively. AEM is not performing since the dilution announcement earlier this week and can be replaced with any number of other gold stocks. I like GG.

Place the Fibonacci extension from the previous day low to the ORH.


anarco said...

Hey Jamie~
I am really glad you caught ABX on Friday. I have it on my WL but missed it; maybe organizing the WL by % change will help me out in the future.
I wonder if you could elaborate on your second ABX entry. I keep studying the chart but I am unable to find the logic behind that nice second call. In fact, I would have considered ABX for a short should it had broken $25 around 2pm. My logic is that from 13:25 to 13:55 ABX chops around below the 100% fib extension, and since 100% is a reasonable move, one could expect a retracement back to the 61% of 50% fib ext. Please let me know your thoughts.

Thanks in advance!

Jamie said...

Hi Anarco,

If you look at the 1 min. timeframe you will notice a tiny C&H pattern around 11:30. The base of the handle is $25.00. On the shallow retracement, ABX tested this level twice during lunch and it held as support. I wasn't expecting a big retracement but possibly 38% which is normal for trending stocks. However, $25.00 turned out to be solid and was never tested again, as price and volume contracted ahead of expansion. The entry is outside the dead zone trading range, so no anticiapation, just reaction to a strong trending stock. Why not?

Generally speaking, a strong base on the way up can provide solid support on the retracement.

Either way I was prepared to take a second entry on ABX because if it did go lower, I knew the rising 20 EMA on the 15 minute was going to hold on a closing basis. ABX and the sector was just too strong given the breach of support of the S&P on Thursday.