Norton Gold Fields Limited (ASX:NGF) is a gold production and exploration company focused on the Paddington Gold mine. The company currently operates the Paddington Gold Mine at Kalgoorlie, WA and is planning to develop the Mount Morgan Gold Tailings Project in Queensland. NGF is actually Australia’s fourth largest ASX-listed gold producer and also has active copper and coal exploration projects.

The price action is interesting because uncorrelated with equity indices and has already started a rebound that strengthens into a real bullish momentum. The stock has reached its historical high price on last January 15 at $0.675 before falling until $0.21 on June 17 through downward and correction upward swings. That’s a 69% decrease in value in 5 months!

NGF is now taking advantage of an obvious oversold configuration and is also benefiting from the global economic situation as Gold prices jump back on the international commodities markets, riding on inflation fears and weak US Dollar.

The RSI and the MACD are useful tools for NGF’s technical analysis. Have a look at the RSI first. It rarely crossed above overbought/oversold areas. It just happened once that this oscillator moved significantly up into the overbought zone and, turned downward and eventually crossed below the trigger line. It was in January when the stock peaked to its historical high and then plunged. A 69% decrease followed.

On June 17 the RSI displayed the same pattern, but in the opposite direction. It significantly plunged into the oversold area, bottomed and then crossed above its signal line, triggering a “buy “signal. A strong bullish momentum is expected.

The MACD has also well identified the different waves you see year-to-date. Each time this oscillator crossed below or above its signal line, it corresponded to a high or low price (points A, B, C, D, E and F on the chart). It is now well oriented on the upside and a cross above the 0 line would strengthen the current momentum.

Half of the bearish trend occurred this first semester may be corrected. In this scenario, the 50% Fibonacci retracement ratio (between points A and F) is the main target. It means that $0.50 is the first price objective for the current price action.

[Ed note. Neither the author nor none of the employees of Port Phillip Publishing own shares in Northern Gold Fields. This article does not give trading or personal investment advice, but is intended to illustrate the principles of technical analysis. Consult your financial advisor before making any decisions.]

Filed under Gold, Technical Analysis by Gabriel Andre

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