A couple weeks ago I posted these same charts talking about the pending breakout (in either direction) with silver, gold and mining stocks. Fast forwarding to this week its clear this sector continues its struggle to rally. Key support levels are now being tested and if these levels fail prepare for a sharp correction with mining stocks showing the most downside potential of roughly 25% for the GDX ETF trading fund.
Let’s take a quick look at what is going on.
Gold Trading Chart:
The chart of gold shows price being wedge into the apex of the down
sloping resistance trend line and the rising support trendline. Gold was
trading below this level but has since bounced. But if gold closes the
week below this line in the sand the price could start to fall quickly
and test the $1200 per ounce within a week or two.
Silver Trading Chart:
Silver is under performing gold and trading below its support level
currently. If silver does not recover by Friday’s closing bell then
things could get ugly for a few weeks as investors start to exit their
positions. That being said, I need to point out that silver is more of a
wild card when using trend lines like this. Both gold and gold miners
should be confirming this breakdown in silver if it is the real deal.
Gold Mining Stocks ETF:
The chart of gold miners I like the most. I like it because it’s
pointing to lower prices, roughly 25% lower if the breakdown takes
place. Gold mining stocks could be a fantastic long term investment if
we see the $17.50 level reached on this GDX etf.
Last week I talked about ETF trading strategies
and the big picture on gold, silver, miners and bonds. They look to be
nearing a major bottom and once they do bottom it should be a great
buying opportunity for specific stocks or the entire sector.
The next few weeks are going to be crucial for precious metals and we will keep an eye on them as this bottom unfolds.
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