What Do Technical Indicators Say About Goldcorp?
Where Might Goldcorp Be Headed after Its 1Q16 Results?
Technical indicators
Previously, we looked at Goldcorp’s (GG) business fundamentals. Although the company’s operating environment has improved, with higher gold prices (GLD)(IAU), it’s trading at a huge premium to its peers. We’ll look at that later in the series. Let’s look now at its technical indicators and see if there’s any possibility of a near-term pullback in its share price.
Imminent pullback?
Traders and investors look at moving averages when deciding whether to enter or exit a market. Usually, if a stock is trading below its 20-day or 100-day moving average, it’s an indication that the stock is oversold. Similarly, if a stock is trading much higher than its 20-day or 100-day moving average, it indicates an overbought position.
As the above table shows, all of the gold miners are trading above their 100-day and 20-day moving averages.
This overbought situation is most apparent in Kinross Gold (KGC), which is trading 90% above its 100-day moving average. But other miners aren’t far behind. Goldcorp is trading 34% above its 100-day moving average. Newmont Mining (NEM), Barrick Gold (ABX), and Yamana Gold (AUY) are trading 40%, 51%, and 72%, respectively, above their 100-day moving averages.
Relative strength index
If the RSI (relative strength index) approaches 70, we can assume that assets may be overvalued and that we could see a fall in prices. If RSI approaches 30, it shows that an asset may be oversold and could become undervalued.
Based on its closing price on April 28, 2016, Goldcorp is trading at 68, which is very close to the upper level of 70.
Although the technical indicators mean there could be a short-term pullback in Goldcorp’s share price, you should note that markets can remain overbought or oversold for extended periods.
The current overbought situation is also apparent in GDX and the SPDR Gold Trust (GLD). GDX and GLD are trading 38% and 8%, respectively, above their 100-day moving averages. For more on gold’s price performance and its outlook, you can read Must Know: Where Are Gold Prices Headed Next?
In the next part, we’ll see how analysts reacted to Goldcorp’s 1Q16 results.
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