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Closing the gaps in gold

Jack Chan
May 30, 2005


Lately, many gold analysts have jumped on the "COT" bandwagon, therefore, I will focus on something else this week. Those who are interested in my original COT model can view it at www.stockcharts.com, go to "public chart list," then "JC's buy and sell signals."

Gaps are very informational to a technician, and when combining the gaps with volume, we get a solid feedback on whether a gap will provide support, or resistance.

Volume analysis on gaps

The theory is that when a gap is filled at lower volume than the gap, that gap will act as resistance. Therefore...

- A down gap filled at lower volume will become resistance.
- An up gap filled at lower volume will become support.

GLD - is the new ETF for bullion, it became tradable in Nov 2004, just as bullion peaked after a four year bull market. Lets go over the gaps, and without putting you to sleep, we'll just go over the prominent ones...

G1 - gap #1 from early Dec was on heavy volume, it was filled in March at lower volume, it became resistance and prices turned down immediately.

G2 - the up gap in early Feb was on huge volume, remains unfilled.

G3 - down gap in mid March was on light volume, remains unfilled.

G4 - another down gap occurred 2 days after G3, this time on heavy volume, was filled in late April at lower volume, became resistance, and prices turned down immediately.

G5 - down gap in early May was on heavy volume, filled immediately at lower volume, became resistance and prices turned down yet again.


G2 and G3 remain unfilled, G2 is at the $415 level (GLD has a value of 10% of the actual spot price), and G3 is at the $443 level. With today's price at $417, we are only a couple of dollars away from filling G2, and unless volume comes in at more than 7.5 million, that $415 level should act as support and up we go to fill G3. That would translate into a minimum rally worthy $30, and since G3 was on light volume, it would not be much of resistance. My prognosis is therefore, bullish on bullion.

That was the price of gold, how about gold stocks?

G1 - down gap in March was on light volume, remains unfilled.

G2 - down gap in April was filled quickly at lower volume, became resistance and down we went.

G3 - down gap in late April was on huge volume, the most I've seen for a long time, remains unfilled.

G4 - up gap on 5/24 was on average volume, and it was because of the gap that I didn't buy although we had a TLBBS right there. We need to see that gap filled, hopefully on lower volume so that it will become support and yours truly will be loading up. If the gap is filled at higher volume, then down we go again.


Ideally, I like to see G4 become support and then go after G3. This potential rally is worth about 10% which is tradable, because we need a miracle to see G3 filled at higher volume. Both Warren Buffett and Bill Gates will have to help us out in order to top 13 million. If that happens, then G1 will be a piece of cake and "to da moon" we go again. My prognosis on gold stocks is bearish.


It is clear as mud that the future directions of bullion and gold stocks will likely perform at different levels, specifically gold stocks are likely to under perform bullion for the foreseeable future. Of course, that could change in a heart beat as soon as volume returns to the gold stocks, Mr Buffett and Mr Gates, are you listening?

Have a wonderful Memorial Day.


May 26, 2005
Jack Chan
email: jack@simplyprofits.org
website: www.simplyprofits.org

321gold Inc