Pattern & Technical Analysis
Loving this chart, GSS trading at 52-week low, due to bearish outlook for mining stocks etc, GLD + XLB are not the hottest trading ETF's but GSS is significantly under-valued. Lets have a look.
We can above the multiple bottoms and the Descending Wedge Pattern : Bullish Reversal Pattern
We have established strong support at the $1.50 mark, this leads be to believe that supply is being meet by demand here...and this 1.50 mark as stopped over-extensions in supply in the past 4 months, hence the phrase "strong" support. It just appears bears cannot push GSS past this level.
- If $1.60 is pierced then $1.80 is the next level.
- If $1.80 is pierced and we get over the $2 mark, then we are looking at a legitimate possible long term trend reversal, Wedges are know for this kind of reversal action.
We have strong support established, as well as an observable rounding bottom formation at the last touch of this wedge. The wedge channel lines are contracting nicely as they are suppose to, so i believe the bounce off of this 1.50 mark, will be the bounce that pierces the wedge.
Momentum Analysis
Momentum indicators across the board scream over-sold, a we have some specialized momentum indicators with buy signals which i will show below.
5 Day EMA crossed %R in at Over-sold level: Bullish
5 Day EMA crossed True Strength Index at Over-sold level: Bullish
Stochastic & Momentum indicator cross over, plus turning upwards nicely in the Over-sold region of the chart.
Momentum analysis suggests GSS is definitely over-sold and due for a nice run here shortly. I agree, all the indicators are very over-sold and are turning upwards to climb out of the rut GSS has been in. This is all very bullish for GSS, we can see indicators across the board suggest its time to buy and ride a new wave of positive price action.
We also got a MACD cross-over taking place as well as a MACD Divergence signal: Super Bullish especially for long term price action.
Volume Analysis
Volume indicators show a decrease in volume over the past two weeks. This is typical in the Descending Wedge Pattern. OBV plus A/D suggest steady accumulation at these price levels with alot more to come.
Entry Strategy
Based on some of the analysis methods of my system, this is a high probability trade. I think tomorrow we will open either at 1.55 or a penny or two below or a above, depending on the markets overall open, which should be up. I would start by buying a couple 5k block shares with a tight limit. Just test the waters to see if the bottom is legit. We saw a nice hammer candle form today, which is a bullish reversal candlestick.
Overall GSS looks like a great bottom trend reversal play, and since its ADX rating is 17 is definitely in a oscillating zone and indicators should be used to judge if it is over-sold....**which it certainly is**......i going to initiate a 70,000 share position, around 1.60 tops.
Position: Long
Target: $2.45
Read through and studied your GSS info. Absorbing as much as possible at this time. Whole new science to learn, thanks for breaking it down. In this descending wedge pattern, is it primarily the multiple bottoms offering strong support that lead to the belief of a bullish reversal? The bottom needs to be tested, right? Otherwise stock could just keep falling past previous lows. Thanks!
ReplyDeleteYes it does, and we have seen this 3 times in the past 5 months....multiple bottoms in a descending wedge = even more bullish. We saw a bottom in October, January, Mid March and now recently a weekish ago, so its safe to say the 1.50 support level is iron clad, so this play should shoot up up to at least 2.50 a share, my expectation based off of chart analysis its that simple.
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