Gold Stocks Reverse at Resistance Targets
Commodities / Gold and Silver Stocks 2016 Mar 05, 2016 - 12:26 PM GMTBy: Jordan_Roy_Byrne
Two weeks ago, regarding the miners we wrote:
If it (GDXJ) surpasses its 80-week moving average then its next target is $27-$28. Meanwhile, GDX is holding above previous resistance at $18. Its next strong resistance targets are $21 and $22.
Earlier today GDX and GDXJ came within pennies of $21 and $29 respectively while Gold touched $1280 before reversing. While Gold and gold stocks could continue a bit higher, their rebound may have ended Friday morning.
A weekly candle chart of GDXJ and GDX is below. The miners over the past six weeks have formed six white candles and taken out their 80-week moving averages, which contained the strongest rallies during the bear market. However, the miners formed a nasty reversal on Friday after touching resistance earlier in the day. The miners could, at the least, test their 80-week moving averages which are now support.
The recent rebound was similar to that from the October 2008 lows. Then, GDX rebounded 69% (from low tick to high tick) in five weeks while over the past six weeks GDX surged 68%. Then, GDX corrected 20%. GDX also corrected 29% during that rebound. In recent weeks GDX has not corrected more than 10%. It would not be unreasonable for GDX to correct 20% or even 25% from Friday's high.
Meanwhile, Gold reversed course after reaching a confluence of resistance which includes the 40-month moving average. There remains a small chance that Gold could test $1300/oz before correcting. Gold has support at $1240/oz and $1200/oz.
The bearish reversal at resistance coupled with history makes a strong argument that gold stocks could correct recent gains in the days and weeks ahead. A 20% decline would be normal and reasonable given the context. For those of us waiting for a correction, it could be coming. The month of March may provide the best buying opportunity in the miners since December 2015.
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Good Luck!
Bio: Jordan Roy-Byrne, CMT is a Chartered Market Technician, a member of the Market Technicians Association and from 2010-2014 an official contributor to the CME Group, the largest futures exchange in the world. He is the publisher and editor of TheDailyGold Premium, a publication which emphaszies market timing and stock selection for the sophisticated investor. Jordan's work has been featured in CNBC, Barrons, Financial Times Alphaville, and his editorials are regularly published in 321gold, Gold-Eagle, FinancialSense, GoldSeek, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan was a speaker at PDAC 2012, the largest mining conference in the world.
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