Yamana Gold Inc. offers trading opportunities

Feb 7th, 2011 – Comment

Yamana has been range bound with support at $10.00 and resistance at $13.00. The forecast for production is 1.7 million ounces by 2014. Trade this one until it makes a move out of the range.


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Hi there Lou,

I haven’t spoke to you in a while. I wonder if you can give me an update on Yamana Gold,your view both short and long term. Would you be a buyer at current prices.

Thanks,

Jim.

Hi Jim,

I last posted in Yamana Gold Inc. (YRI TSX ) on January 25, 2010 for Rafi. At the time YRI was in a downtrend and needed to hold support on its 200 day moving average at $11.36. If it failed to do so it would have to test support at $10.00. The charts will tell the story of what was and perhaps help point the way forward.

The three year chart indicates that YRI did in fact test $10 in May of 2010 then caught a bounce off that level and made a run to $12.00 where it hit its head on the 200 day moving average. What used to provide support had transitioned to resistance. On the pull back from $12.00 the stock breached support at $10.00 and tested $9.50 in August of 2010, where there was another ledge of support. From $9.50 YRI marched all the way to $13.00 in late December of last year.

It doesn’t take a math major from the University of Waterloo to see that on a percentage basis the moves just described offered some healthy trading profits for investors who followed the stock and understood what the charts were telling them. It is worth noting that more money trades on technical parameters than on fundamentals.

The six month chart illustrates the strength of the MACD as a signal generator. A series of buys and sells are visible and at this moment the indicator is calling for a buy. There is resistance at $12.00 and again at $13.00 so on a short term basis you don’t want tot be looking at YRI as a buy and hold. On a longer term basis if the stock can break above $13.00 it can run to $15.00 without any resistance.

Yamana has been range bound with support at $10.00 and resistance at $13.00 for the better part of two years. That’s a lot of base building. The forecast for production is 1.7 million ounces by 2014. Trade this one until it makes a move out of the range.

Happy Capitalism!

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