GBB Chart Update: Uptrend Remains Firmly Intact

John: This chart should be extremely useful for those who may have panicked Friday when Gold Bullion Development (GBB, TSX-V) came out with very positive news but the stock ended up declining a nickel to 63 cents. It’s always a mistake to look only at a daily move and not put it in context with the overall trend. On a day when the Gold Bullion share price goes up, investors are happy but as soon as it has a down day all some can see is doom and gloom (this applies to many stocks and many investors). I doubt if a lot of investors have taken the trouble to learn about technical analysis which is critical to evaluating the potential of a company. If you understand a few aspects regarding a chart, just a glance will tell you if the general trend is up, down or sideways. Just looking at the latest trading day statistics tells you very little, and if one basis decisions on these daily trading statistics you’re simply guessing and that’s potentially fatal for your capital. To prove my point I will show you some positives on the chart from last Friday’s down day for GBB:

On Friday, GBB opened at 65 cents, rose to a high of 68 cents, fell to a low of 60 cents and then closed at 63 cents on CDNX volume of 2.7 million shares. This was a loss of a nickel for the day (traders love to “sell on news”) but a gain of 3 pennies for the week.

Looking at the chart we see that there is resistance at 69 cents (blue horizontal line) and 4 support levels (green horizontal lines) – 55 cents, 57 cents, 59 cents and 60 cents. From September 22 to October 28, GBB traded in a horizontal trend channel between 55 cents and 59 cents. At the end of October it broke to the upside to a high of 64 cents, and then it retraced down to a low of 57 cents. From November 8 it has slowly been moving higher to reach a high of 69 cents before declining Friday.

Also drawn on the chart is an upsloping green dotted line. This is a trendline starting from October 26, so even though since then there has been a decline and several down days, the general trend is up. Also note another positive - when the share price declined on Friday it stopped and rebounded from the 60-cent support level. This trendline and the resistance at 69 cents is starting to form a bullish ascending triangle. Yes, the chart is starting to look very bullish for GBB.

Looking at the indicators:

The RSI is at 54% and is bullish because it’s above the 50% level.

The Slow Stochastics has the %K (black line) at 69%, above the %K (red line) at 65% with both pointing up. There is plenty of room for them to move higher without becoming overbought – bullish.

The ADX trend indicator has the +DI (green line) at 31 and above the -DI (red line) at 20. The ADX (black line) trend strength indicator is flat at 26. These are in bullish orientation.

Outlook: The Gold Bullion chart indicates that the uptrend for GBB will continue. The formation of an ascending triangle has bullish implications. This stock’s share price is expected to gradually increase with the technical outlook supported by consistent and solid exploration results. Investors with patience will certainly do very well with this company.