The precious metals company with royalty claims on gold, silver, copper, lead, and zinc at mines in over 20 countries, Royal Gold, Inc. (NASDAQ: RGLD) seems to be ready for an upmove according to its latest charts.
Bullish Indications
#1 Double Bottom Breakout in Daily Chart: As you can see from the daily chart of RGLD below, the stock had recently broken out of a (smaller) Double bottom pattern. This pattern is marked in orange color.
A Double bottom pattern is a bullish reversal pattern, indicating that the stock could possibly move upwards. Currently, the stock has retested the (smaller) double bottom pattern’s breakout level. This typically happens before continuing its upmove.
Note: There is also a bigger double bottom pattern being formed, which is shown in pink color. Once the stock breaks out from this (bigger) double bottom pattern, it could surge ahead.
Daily Chart – RGLD
#2 Near Support Levels: The stock’s daily chart shows that the stock has moved up after taking support near the 50-Day SMA. There is also a long-term support level close by, which is marked as a blue dotted line. These are all good support levels.
[hana-code-insert name=’adsense-article’ /]#3 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30.This indicates bullishness.
#4 MACD above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#5 Downtrend Broken: The daily chart shows that the stock has broken out of the short-term downtrend.
This downtrend line has been marked in purple color in the chart. This indicates that the bulls are getting stronger.
#6 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. RGLD has currently taken support at the 61.8% Fibonacci support level as seen in the weekly chart. This seems like a good area for the stock to bounce upwards.
Weekly Chart – RGLD
#7 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#8 MACD above Signal Line: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color), implying possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of RGLD if it breaks out from the (bigger) double bottom pattern and registers a daily close above $80.
TP: Our target prices are $90 and $100 in the next 3-6 months.
SL: To limit risk, place a stop loss at $76.50. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 13% to 25% in the next 6 months. For a risk of $3.50, our target rewards are $10.00 and $20.00. This is a nearly 1:3 and 1:6 risk-reward trade.
In other words, this trade offers nearly 3X to 6X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks with high volume from the double bottom. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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