Technical outlook – Technically, things are starting to look exciting for Saracen Mineral Holdings Limited (SAR) as we expect this share is in the midst of a potential short-term reversal from the current downtrend, due to the bullish divergence given from the 3-day lookback Relative Strength Index (RSI).
Traders can take advantage of divergence by using a variety of trend-based strategies.
Divergence is probably one of my favourite trading signals because they are dynamic and most often offer a reliable, high-quality trading signal reversal when combined with other trading tools and concepts.
In technical analysis, divergence can be a significant warning signal that a bullish or bearish trend is coming near to an end.
Divergence appears when a technical indicator (oscillator) begins to establish a trend that disagrees with the actual price movement.
These “disagreements” are strong signals and somewhat useful for the trader/investor.
Bullish divergence occurs when the price of an asset makes a new low while the indicator starts to climb.
If this pattern plays out in accordance to the bullish divergence (as we expect), then we could see this share advance to $3.22 to 3.28. Reassess from there.
Company Overview – Saracen Mineral Holdings Limited (SAR) is an ASX 200 listed gold mining company with an annual production of over 300,000ozpa, with growing cash flows (forecast all-in sustaining the cost of less than A$1,075/oz).
Saracen’s production comes from two WA projects, Carosue Dam Operation and its Thunderbox Operation. Both operations have long lives with extensive potential for further growth through exploration. Former Names: Central West Media Ltd (CWM), 05/08/1997.