L.A.'s article appeared on the video section of TheStreet.com on 03/11/2010. Here is the accompanying video.

Great Basin Gold (GBG) has transitioned from being strictly an explorer to a producer and the stock price doesn’t fully reflect that yet. With the metal itself still struggling, this is a time for accumulation if you continue to think that precious metals and precious metal stocks continue to hold long term promise. I believe they do and this name is one of my favorites.

To try and impart that thought to you, I take the time today to walk though the various timeframes and consider what the charts are telling us. The sector is confirmed long term bullish and the same is true of the stocks. Having said that, price weakness has been evident for the past few months and I do not believe that is going to change any time soon. In my opinion, gold is building a base to move higher once more in the future.

Turning to GBG, on the long term timeframe, we can see related highlights that are worthy of our consideration. Starting from left to right, the swing lows from 2007 were just slightly higher than the current price point. In the same vein, the swing highs from early 2009 bumped into that price area and it did so with volume expansion. For four of the past six months, volume has expanded tremendously as Great Basin’s mines began to churn out the precious metal. While other gold stocks have traded lower, GBG instead has held up fairly well. When you bang against the swing point area with volume expansion, eventually the area will be taken out. I do believe that is what is in store for this stock.

GBG Monthly

Charts by ProphetNet.net

Narrowing the timeframe to a weekly chart, we can see that the stock is in a confirmed bullish trend because volume expanded as we took out the swing point from June. The bar that was removed now becomes the retest area as prices retreat (highlighted in the chart below).

GBG Weekly

Charts by ProphetNet.net

So far, that zone has contained prices as the bottom and top end of the retest zone has continued to be probed. As the sector weakens, prices drift to the lower end and when it strengthens, the opposite occurs. Consolidation at these price levels is what we see happening.

Finally, shifting to the daily view, we can see a low volume low sitting out there which has yet to be tested. It will fall off the daily chart soon so it may not matter, but as long as it’s sitting there, it has the possibility of being tested. That would be the sweet spot to add shares if that were to occur.

GBG Daily

Charts by ProphetNet.net

The problem with the market is that it seldom gives you the ideal buy points, and if it does, it hurts like heck to buy them as you are usually in some sort of apparent freefall when it does happen. That’s why you have to find other price points that are still good entries – not ideal. In the accompanying video, I highlight where that area is to me as well as provide additional details on these charts in an animated form.

So, until next time, keep trading the charts!


Originally published on TheStreet.com
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