Sunday, March 13, 2016

Gold Miners (GDX): Still too hot to handle

I called a fall in gold miners (GDX) way too early as I did not properly factor in the change the gold market is making at the moment by transitioning from "bear" into "bull." I was in a hellish trade which cost me dearly but I'm back in as the signs of a transition are beginning to mount. GDX is still severely over-bought and the COT report show the largest number of short positions by institutional investors in about 6 years. On the internet the number of calls by respected commentators and chartists are starting to grow louder and more numerous:
The 30 minute chart has clearly show a break from the long-term up trend to a series of channels that are gradually transitioning to a down trend. Already last week we began seeing a series of lower-lows.
The daily chart is the most confusing of the lot and provides the least amount of guidance except that a strong resistance line at about $20.75 is present and has rejected advances for the past five sessions.
The weekly chart is perhaps the most interesting with several resistance lines apparent. One is a channel line from GDX's decline going back to 2014 and part of a pattern going even further back to 2013. The second is a horizontal resistance line at $20.75 (mentioned above) and third coincides with some higher lows back in 2014 and 2015. The over-boughtness is also quite apparent on the RSI(5) index.
Let me be clear though, I am very bullish on gold and gold miners in the medium and long-term however pull-backs will occur and they can be taken advantage of both in the decline and the opportunity to buy more. This is strictly a near-term play.