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The above chart goes back until 1985, and each candle represents one month of price action. The main point of the above chart that I would like to make is that gold stocks are in a massive bull market, and that this correction we are going through has not even made a dent. Secondly, the XAU is close to support at the 160 level, which previously was resistance.
The next chart is a weekly chart of an ETF that follows a basket of large gold stocks. The ticker symbol is GDX:
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Up next we have a daily chart of GDX:
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I showed the above chart in my previous post. In the annotations of that chart, I said that if GDX descended to the green support area and made a hammer, I would cover my hedge. This is what in fact unfolded this week, so, thus, I am no longer hedged.
The evidence is now building for a bullish case for gold, however, it is important to not dive in head first into this market. I will slowly scale back into gold stocks depending on how the evidence looks.
One more more piece of evidence in favour of gold stocks is a chart that divides the price of gold by the HUI gold stocks index:
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The bottom line is that it probably is a poor time to be short gold stocks right now. I am not 100% convinced that the bottom is in, and stand ready with cash to be redeployed to the long side.
Unfortunately, I have decided to take a break from this blog for at least several months. Good luck trading in the meantime.
-Danny
DannyMerkel@hotmail.com
3 comments:
Thanks for the effort, and enjoy the Summer. I have been looking in semi-weekly, and always appreciate your analysis.
I have the feeling we are in for some interesting times later this year.
Sell in May and Go Away? Good luck.
Hey Danny,
Thanks for all your hard work and for sharing your thoughts and trades with us. I look forward to your return at a later date.
Hi Danny, We are already missing your blog and analysis. Maybe we are entering a quite time for gold so this could be a good time for a blogging break. Please let us know when you return!
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