November 27, 2024 Advertise | Contact Us | About Us | Search

Gold Stocks Reverse at Resistance Targets

Author, CMT, and Editor @ The Daily Gold

March 5, 2016

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.

Yesterday 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.

********

Consider learning more about our premium service including our favorite junior miners which we expect to outperform in 2016.

[email protected]

Jordan Roy-Byrne, CMT is a Chartered Market Technician and member of the Market Technicians Association. He is the publisher and editor of TheDailyGold Premium, a publication which emphasizes market timing and stock selection, as well as TheDailyGold Global, an add-on service for subscribers which covers global capital markets. He is also the author of the 2015 book, The Coming Renewal of Gold’s Secular Bull Market which is available for free. TheDailyGold.com was recently named one of the top 50 Investment Blogs by DailyReckoning and WalletHub.