A New Uptrend Could Help Fix Flaws In Chart

• Paul Whitfield
• On 6:55 pm EST, Friday November 6, 2009

For the past five sessions, gold-mining stocks have enjoyed a rush.

They rose, as a group, more than 10% last week, putting them in the spotlight.

Recently, we've discussed two of the stronger bases in the industry.

Now let's look at a flawed base.

Goldcorp (NYSE:GG - News) has shaped a double-bottom base with a middle peak that rose too much. It made a new intraday high within the pattern.

It might sound like being picky. But think about what the chart reflects in human terms.

The second leg down in a double-bottom base provides a shakeout. You want to get rid of the weak holders there -- so they're not acting as a brake as the stock tries to break out.

But a middle peak that is too high isn't proper. The price action in Goldcorp now shows some resistance around 43.

Does this mean the breakout will fail? Not necessarily. If the stampede toward gold stocks proves strong enough, it will overcome the usual considerations.

Goldcorp's base shows slightly more distribution than accumulation. The Accumulation/Distribution Rating is B-, but that's over a longer period than the base.

The base is forming near a prior cup with handle, making this a base-on-base formation.

Buzz up!