XAU Stock: All Eyes Are on This Price Point
I don’t think there is anything that is creating more buzz than Bitcoin and its cryptocurrency counterparts. It’s actually crazy that something dubbed “digital gold” has grown into something so big that it has gained legitimacy by trading on not one, but two futures exchanges.
In reality, Bitcoin is not digital gold. It has no intrinsic value because it is backed by nothing. Therefore, placing a value on it using a fundamental approach is nearly impossible.
While everyone is focused on Bitcoin, there is actually a company doing exactly what Bitcoin is claiming to do. The company is GoldMoney Inc (TSE:XAU, OTCMKTS:XAUMF), and it backs the account you set up with them with physical gold.
This is obviously a great reason to like the stock, but the reason I am focusing on it, and how I stumbled upon it, is that the XAU stock chart is very compelling, which is just a fancy way of saying there is potentially a very large move in the making.
If you have not come across my work in the past, let me quickly explain the basis that my views are predicated on. I use a method called technical analysis to research potential investments. This method of investment analysis is based on the notion that historical price and volume data can be used to forecast what the future may bring. This data is found on a company’s stock chart and, therefore, my views are based on my ability to interpret that data.
The following GoldMoney stock chart illustrates why it is currently on my watch list.
Chart courtesy of StockCharts.com
This XAU stock chart illustrates that a significant level of price resistance currently resides at $8.00. This level was first established on May 20, 2015, which was just five days after the stock began trading. After this level was established, a substantial sell-off quickly followed, and it has taken two-and-a-half years’ time to get back to this level to retest it.
I have reason to believe that, once this level of resistance is finally broken, it will unleash a tsunami of buying interest that will mark the beginning of an epic move toward higher prices. The reason this pattern is so powerful is that, once resistance is broken, there is absolutely no overhead resistance to contain the price from advancing and, in essence, the sky becomes the limit.
This is obviously a bold statement to make about the prospects of XAU stock, but it is also contingent on this stock breaking above $8.00.
The dynamic that fuels such a move is based on the notion that, once resistance is broken, anyone who is short on XAU stock is underwater on their position. As the stock price rises, their inclination to cover continues to grow. New highs create a buzz and it attracts momentum from investors who profit from chasing performance.
This creates a scenario in which two parties are chasing the same share price and higher prices fuel more demand. This leads to a vicious cycle known as a short-covering rally.
I have seen many chart patterns in my lifetime, and ones that exhibit this characteristic have gone on to become very good investments. In actuality, some of the best-performing stocks carry this exact characteristic.
I’m sure Facebook, Inc. (NASDAQ:FB) rings a bell; it contained this exact characteristic, in which it created a high right when it began trading. It took 16 months to return and test this level of resistance. Since Facebook stock breached this price point, the stock as not looked back, and it continues to forge new highs.
I believe that, once XAU stock breaks above $8.00, something similar in nature will follow, and it is why I have this stock on my watch list.
I am watching this stock because a very special price pattern has emerged on the XAU stock chart. I have reason to believe that, once resistance at $8.00 is finally broken, much higher prices will follow.