KGC (Friday Close at 22.78)
KGC is a gold stock that seems to be in a corrective phase and is giving signals that it might have topped out, though no confirmation has yet been given. Because the inflation situation is still a big concern and not likely to go away soon, it must be assumed that gold stocks will continue to rally. Nonetheless, the price of gold recently took a sharp move down, and stocks such as KGC are giving chart signals that are conflicting. It's not likely that conflict will be resolved clearly for a couple of weeks. In the case of KGC, the stock seems to be offering a dual opportunity to be both a seller and/or a buyer at either the support or the resistance level (whichever is reached first).
KGC gapped down last week from a support level of consequence at 24.14 and the stock has been unable to close the gap as of yet. The gap did take the stock down to a major level of support at 20.49 where the 100-day MA is currently located as well as a major previous high that was in place for over 2 months back in Nov-Jan. The drop down encountered enough buying to prevent a further drop and a rally ensued that took the stock up "toward" the resistance level and gap area that is now considered major resistance. The probabilities are very strong that KGC will be trading over the next couple of weeks between both support and resistance.
Support is very strong at 20.34-20.84, on a daily closing basis, and at 20.49-20.65 on a recent intra-day basis. The 100-day MA and the 20-week MA are currently located at 20.94 as well. Resistance is decent at 22.33-22.43 on a daily closing basis but on an intra-day basis the resistance is seen between 23.70-24.05, from two previous important highs at that level, one previous important low at 23.70 and the gap area at 24.19-23.84. In addition, there is one additional resistance level at 24.52 where a previous high is seen as well as the 20-day MA.
Since the stock is still in an up-trend and inflation as well as the price of gold still in people's minds, it is therefore likely that the long side is more attractive than the short side. Nonetheless, the resistance level is so clearly defined that the risk/reward ratio on both sides of the trade is attractive.
Purchases of KGC at 20.94 and using a stop loss at 20.39 and an objective of 23.90 will offer a risk/reward ratio of over 5-1. Sales of KGC at 23.90 and placing a stop loss at 24.62 and having an objective of 20.94 will offer a 4-1 risk/reward ratio.
My rating on the trade is a 7.5 on the buy side and a 6.5 on the sell side (on a scale of 1-10 with the strongest probability rating being 10).
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I liquidated my long position yesterday at 23.92.
Profit on the trade of $309 per 100 shares minus commissions.
I considered going short per my newsletter mention but decided to wait one more day before making that determination.
Great rally in KGC today and the position that was purchased yesterday is already up $2 in less that 32 hours........
I do expect follow through tomorrow and a rally up to the 23.70-24.19 level is anticipated.
Nontheless, I will be taking profits then and might just institute the second part of my mention which is to short the stock if it gets up to 23.90 using a stop loss at 24.62.
It is very likely this stock is in a $3-$4 trading range at this time.
Purchased KGC at 20.88 this morning per my newsletter mention. Mental stop loss is at 20.39 and the objective is 23.90.
I am risking $49 to make $302 per 100 shares. Risk/reward ratio of 6-1.
It's a small point, but legitimate advisory services publish their recommendations to their clients, and the price they "book" is the price the clients get after receiving the advice.
It's not legit to post a price you got if you don't have evidence that you told your clients in time for them to get the same price.