ABX update

abx july 21 2015 labx july 21 2015

Yesterday gold fell about $26 or 4%, give or take. ABX fell almost 16%. We do understand that as you approach the marginal costs of a producer, the impact on the stock is disproportionate to the change in the price of gold (oil, whatever), but this is a little ridiculous. 4X as much? Perhaps a sign of (the beginning) of capitulation. We believe there may be one more push down towards $ 8 or so.

In our opinion ABX is doing a full correction, that is an A-B-C from the recent top of $52+. I have used semi-log scale charts as they depict the proportions much better when such large moves are involved. At one point we thought the C could develop as a contracting wedge and consequently could have been complete at the $11.63 low. We did get a very nice bounce but it could not break the upper trend line. Now we are entertaining the idea that a expanding wedge is forming as the whole of wave C. This means that the stock could, but does not have to, move all the way to the lower trend line at about $8. From the structure it looks like we need another small 4 and 5 of 5 of C.  This is supported by the RSI. You will notice that when it hits a low it takes a little while for the stock itself to make a corresponding low. The lag could be as long as a month but under the circumstances, that is where we are in a capitulation phase, things may happen more rapidly.

The XAU at about $48 is in an identical position .