Round Number Gaps

by Olivier on January 6, 2009

The trading behaviour of RGLD – Royal Gold reminds me of something I’ve come across in the past. I can’t remember the exact name of the phenomenon. I believe it is ‘midpoint rule’. It says if prices gap above round numbers ( like 50 in RGLD’s case ) without ever trading at that level it is considered to be the mid point of a price movement. Something reminding one of continuation gaps with a price target attached to it. If that happens it would give us a price target for RGLD of 100. Another round number. Jim Sinclair mentioned that number a while back. I don’t know how he calculated that target – I just presented the way I come to that very same conclusion.

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