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Agnico Eagle Mines Ltd (AEM.TO)


When comparing resource prices and resource stocks, its generally considered that stock prices tend to lead resource prices. The reason for this is that implicit within a resource stock price is investor sentiment toward future price and production levels.

The Gold price staged a big surge in late 2023, hitting a new all-time high at one point, and has recently levelled off between $2,000 and $2,080 in what appears to be a pause to digest previous gains. Recently, however, gold stocks have started to retreat and fall down in broad market relative strength rankings suggesting that gold may potentially be vulnerable to a deeper correction, particularly if treasury yields and the US Dollar continue their comeback.

Agnico Eagle Mines Ltd (AEM.TO) for example, has lost 9.0% in the last month, while the price of Gold (GC.F) itself is down 0.9% over the same period. AEM.TO has dropped 8 positions in the SIA S&P/TSX 60 Index Report over that time and yesterday it returned to the Red Unfavored Zone for the first time since October. Agnico has been out of the green zone since June.

Candlestick Chart Shows Upward Momentum Faltering:

For over a year, Agnico-Eagle Mines (AEM.TO) have been stuck in a sideways trading range between $60.00 and $80.00. This neutral trend has been reinforced by the formation of a Symmetrical Triangle of higher lows and lower highs, but with that pattern closing in on its apex, decision time may be approaching.

Last month, the shares peaked at a lower high near $75.00 and since then, they have rolled down under $70.00 and fallen under their 10-week moving average, which now reverse polarity to become initial resistance. Initial downside support appears in the $60.00 to $62.50 area.

Should that area hold, the sideways trend may continue. If AEM.TO keeps falling and takes out $60.00, however, it would signal the start of a new downleg that could potentially retest support at the summer 2022 lows near the $50.00 round number.

Point and Figure Chart Downshifts into Neutral:

A fall rally in Agnico Eagle Mines (AEM.TO) shares ran into resistance just short of $75.00, established a lower high. In recent weeks, the shares have started to roll downward, completing a bearish Double Bottom pattern and taking out a previous resistance level that had become support.

While a correction appears to be underway in the short-term, the long-term picture remains more neutral with an uptrend of higher lows intact and a Symmetrical Triangle forming. A close below uptrend support near $62.50 would signal that a deeper downturn may be starting with next potential support at the October low near $58.90. Initial resistance on a bounce appears near $71.85 based on a 3-box reversal.

With its SMAX score falling to a bearish (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) 5 out of 10, AEM.TO is exhibiting short-term weakness against the asset classes.

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