Home > Financial Ponzi > Gold Miners from here?

Gold Miners from here?

So the miners have indeed rallied. The rally has been so violent that it feels due for a pullback. So if I assume that gold miners have broken out decisively from a long term falling wedge (as I do), what pattern might we expect that both a) shakes out some momentum chasers, and b) suggests even larger long term gains? A reverse head-and-shoulders would seem to do the trick. If that winds up being how this plays out, I imagine we should expect a reversal to the downside sometime soon. Here is what I imagine it might look like for GDX:

2016-03-04-GDX_CHARTS

and GDXJ:

2016-03-04-GDXJ_CHARTS

This scenario would suggest taking some profit here and loading up after a pullback. It is of course quite possible that these miners continue churning higher. I would certainly rather just hold long term than be caught empty-handed because I do think this breakout is for real and has much higher to go. But for the swing traders (and I have a bit of that in my blood), this looks like a fun gamble .

 

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  1. Draft
    March 7, 2016 at 12:32 pm

    I’m curious whether you think that a gap fill is likely. Unless I’m seeing things, GDX had a gap in early February. (I also don’t know how often gap filling happens.)

    • March 7, 2016 at 4:04 pm

      Seems possible (and would put the price around the 200 DMA), but given how far it has run since then, I’d be surprised if it pulls back that far.

  2. Draft
    April 14, 2016 at 5:02 am

    Wow you were right — where might it top out?

  3. April 14, 2016 at 10:40 am

    I am surprised that it didn’t pull back further and that it appears to now be breaking out above the horizontal resistance that I noted in those charts. I think it still has a ton of upside. No idea what that means. But the falling wedge took place over many years, and as the Fed continues to push towards negative rates, I think the fundamental case for holding physical gold grows stronger by the day.

  4. Draft
    April 19, 2016 at 8:21 pm

    Where might be the intermediate top for GDX? I thought it had reached it a couple days back, but it pushed through today.

    • April 20, 2016 at 5:19 pm

      I really have no idea. Got the big breakout and, like you, have expected some pullbacks that haven’t transpired. I think the longer term upside remains huge so I am just holding my core. I haven’t had a chance to re-buy the swing shares I sold, but I would like to re-add swing shares on a pullback at some point. I don’t have a good feel for what that might look like though.

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