How to Play the Building Momentum in Yamana Gold

Published on Friday, 17 August 2012 05:20 Written by TradersHuddle Wire

New York, August 17th (TradersHuddle.com) - Shares of Yamana Gold Inc. (NYSE:AUY) closed the trading session at $15.54 with its price action in a very tight range, given that calculated support is set at $14.81 and the calculated resistance is set at $15.61.

Yamana Gold Inc. (NYSE:AUY) is a Canadian-based gold producer with gold production, development stage properties, expoloration properties, and land positions in Brazil, Chile, Mexico, and Colombia. Yamana prodcued 1.05 million of gold equivalent ounces (GEO) in 2010. It has 4 development projects in Mexico and Brazil, expected to add 440,000 GEO.

Yamana's stock price action indicates that both sellers and buyers are materializing very close to each other. This signals an area where momentum is building, since the stock can resolve by breaking out of the developing tight range.

Traders wanting to establish a position should pay close attention to Yamana's price action, as any movement outside its predefined range of $14.81 and $15.61 could grasp the attention of momentum buyers that look for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support could spark above the average selling. A tiered approach could be the best way to start a position; enter into it while the stock is in the tight range, and then add to this position as it breaks and closes above resistance.