We’ve written a great deal lately about the bullish fundamentals for Gold Bullion Development (GBB, TSX-V). Phase 2 drilling appears to be proceeding very well, though we have yet to see any assay results. Some clues suggesting good results can be expected (based on visual observations of the core and deeper drilling in the east-northeast area) were very evident in Gold Bullion’s July 13 news release. In the search for some additional clues as to the direction GBB could be headed, BMR asked its technical analyst to examine Gold Bullion’s chart. Below are his very interesting findings:
Gold Bullion Development is looking very bullish with all chart patterns and indicators suggesting bullish volatility in the near future.
John: On Friday Gold Bullion opened at 49 cents, traded as high as 51 cents near the end of the day, and closed at 49 cents on the lowest daily volume since February.
Looking at the 3-month daily chart, we see that during the first half of May there was a consolidation with a narrow price range just below the SMA-13 (dotted blue line) with relatively low volume. The Bollinger bands were close together and almost horizontal, denoting low volatility. On May 12, on volume of nearly 3 million shares, the price broke above the SMA(13) which started an uptrend culminating in a high of 71 cents on June 25. This bull run effectively doubled the price from 35 cents to 71 cents.
Today’s situation is very similar. The price is again just below the SMA(13) with very low volume and the Bollinger Bands are in a squeeze. This is the first time the Bollinger Band width has been so low since May 11. The chart is telling us to expect some volatility in the near future.
The Fibonacci levels are shown as thin green lines indicating the consolidation level is at the 38.2% (48 cent) level and the next Fibonacci target is 94 cents.
Looking at the indicators:
The RSI is at 42% and flat with plenty of room to move up before becoming overbought – bullish.
The Slow Stochastics has the %K (black line) at 36% and above the %D (red line) at 28% with both pointing up – bullish.
The ADX trend strength indicator has the +DI (green line) and the -DI (red line) close together and in multiple crossovers. The ADX (black line) is pointing down at the low position of 20%, denoting low trend strength. Together these indicate price consolidation.
Outlook: GBB is looking very bullish with all chart patterns and indicators expecting bullish volatility in the near future.
Key moments to watch for which will confirm a new bull run has started:
1) The price closes above the SMA(13);
2) Daily volume >2 million shares;
3) RSI breaks above the 50% level.
The next 2 weeks are going to be interesting.
