Golden Agriculture: Overcame resistance at 72c.

Golden Agriculture overcame resistance at 72c. This is a many times tested resistance and it is also where the 100dMA is approximating. Volume was not exceptionally high which makes the breakout somewhat less convincing but a breakout is a breakout and should be treated as such.

In the next session, we could see breakout chasers buying up the shares of  this counter. This could initially push price higher to close the gap formed on 20 January 2011 and this would be the immediate target of 76c. In time, we could see price overcoming gap resistance with an eventual target of 80c.

For anyone who might want to take a chance that the counter would go higher in price, a smallish hedge is wise since momentum oscillators are all in their overbought regions. With trading volume unimpressive, a pull back to retest supports cannot be ruled out.  Resistance turned support at 72c, unbroken if retested, would be a more ideal entry price than buying at a high.

If a long position were to be initiated at or closer to 72c successfully and if price were to move higher, this would probably be more of a short term trade. Why? Look at the weekly chart for an idea of the longer term picture. From the week of 21 February 2011 to the week of 4 April 2011, weekly volume has been reducing as price moved higher. A negative divergence? You got it.

If we scrutinise the MFI and the RSI, we see lower highs and lower lows as well. So? Price has been rising on weaker momentum. It does not mean that price cannot move higher, it just means that the chances of a breakdown is higher since the breakout is weaker. Being nimble is important here and less greed could be a good thing too.