Gold Miners - Push Up Incoming
Updated
Welcome back guys, sorry for disappearing for a while, I’ll be post more frequently after June!
But in the mean time… here’s what I’m looking at right now.
First, let’s acknowledge that trading gold miners have been pretty boring lately given the tight range it’s been stuck in. That’s why I was primarily day trading for the past month to avoid taking overnight risk, aka the battle between negative macro news and Trump trying to bring the sentiment back up by tweeting.
Now if you look at the GDX chart, you’ll see that the past 31 days have been forming a symmetrical triangle pattern, meaning a lack of trend either up or down. However, this type of pattern usually represents a large move to either side is highly likely, since large players have been likely accumulating or dumping shares throughout this flat period.
This time around, I’m betting that it breaks to the upside. The reasons are as follows:
Potential catalysts for Gold and Gold Miners:
1.) GDX is showing very strong upward momentum on the Money Flow Index, which is similar to the RSI except adding in volume. It’s showing that even though prices are not trending, buying pressure is increasing. I see this as bullish in the short term.
2.) Macro news will likely remain negative when considering the EU, therefore positive for gold
a. May has to step down, speculation is betting on the next leader to be tougher about Brexit. High potential for an exit without a trade deal to minimize economic impact.
b. Economic growth will not likely show a strong reversal anytime soon, given that negative interest rates have done very little to spur growth so far.
3.) Macro news in the US will most likely be neutral.
a. Trump will most likely continue to tweet positive hope for deal. He has to calm the markets at least until he’s re-elected.
b. Labor market is still showing increasing tightness. However PMI and new home sales have been failing to meet expectations.
c. Next round of corporate earnings will not likely be as easy to beat as this first quarter. Since expectations were set extremely low.
4.) Market sentiment has been tough to break recently. With money flowing in to buy up the gap downs. Mainstream media is usually a good place to judge how the general public is feeling, and usually you should be looking for confirmation of the opposite direction of whichever way the news is saying the market will go. Right now I see some positive and some negative, leading me to believe the market will continue to be choppy with no clear direction, which is bullish for gold since uncertainty will maintain a support for safe haven assets.
5.) M&A activity picks up, bullish for miners. (This is probably not likely to happen any time soon, just fun to think about)
a. An increase in M&A activity could draw investor attention to this long forgotten sector.
All in all, I’m currently long miners with a healthy position in NUGT. Placing my stop-loss a little more than half a percent below the nearest support. There might be a final push down by the big players to gather liquidity in order to make the breakthrough push upwards.
But in the mean time… here’s what I’m looking at right now.
First, let’s acknowledge that trading gold miners have been pretty boring lately given the tight range it’s been stuck in. That’s why I was primarily day trading for the past month to avoid taking overnight risk, aka the battle between negative macro news and Trump trying to bring the sentiment back up by tweeting.
Now if you look at the GDX chart, you’ll see that the past 31 days have been forming a symmetrical triangle pattern, meaning a lack of trend either up or down. However, this type of pattern usually represents a large move to either side is highly likely, since large players have been likely accumulating or dumping shares throughout this flat period.
This time around, I’m betting that it breaks to the upside. The reasons are as follows:
Potential catalysts for Gold and Gold Miners:
1.) GDX is showing very strong upward momentum on the Money Flow Index, which is similar to the RSI except adding in volume. It’s showing that even though prices are not trending, buying pressure is increasing. I see this as bullish in the short term.
2.) Macro news will likely remain negative when considering the EU, therefore positive for gold
a. May has to step down, speculation is betting on the next leader to be tougher about Brexit. High potential for an exit without a trade deal to minimize economic impact.
b. Economic growth will not likely show a strong reversal anytime soon, given that negative interest rates have done very little to spur growth so far.
3.) Macro news in the US will most likely be neutral.
a. Trump will most likely continue to tweet positive hope for deal. He has to calm the markets at least until he’s re-elected.
b. Labor market is still showing increasing tightness. However PMI and new home sales have been failing to meet expectations.
c. Next round of corporate earnings will not likely be as easy to beat as this first quarter. Since expectations were set extremely low.
4.) Market sentiment has been tough to break recently. With money flowing in to buy up the gap downs. Mainstream media is usually a good place to judge how the general public is feeling, and usually you should be looking for confirmation of the opposite direction of whichever way the news is saying the market will go. Right now I see some positive and some negative, leading me to believe the market will continue to be choppy with no clear direction, which is bullish for gold since uncertainty will maintain a support for safe haven assets.
5.) M&A activity picks up, bullish for miners. (This is probably not likely to happen any time soon, just fun to think about)
a. An increase in M&A activity could draw investor attention to this long forgotten sector.
All in all, I’m currently long miners with a healthy position in NUGT. Placing my stop-loss a little more than half a percent below the nearest support. There might be a final push down by the big players to gather liquidity in order to make the breakthrough push upwards.
Trade active
We're getting very boring trading sessions these past few days, with a lot of intraday volatility but no clear trend. GDX is still trading within its symmetrical triangle pattern and is looking to breakout sometime soon. Given the length of consolidation we've had, the length of the breakout will be fairly large.
Macroeconomic conditions have not changed for the better, therefore Gold will still likely be supported, and should resume a bullish trend at least in the short term.
Trade active
Took profits on 50% of positions at 15.25 on NUGT. Waiting to see high relative volume on this breakout, if volume is low, highly likely for prices to retrace back into range. Will buy more if it breaks out cleanly. Will also consider buying more if it retraces, but will depend on how Gold is acting, stay tuned for updated next steps.Trade active
GDX looking good so far, volume good, RSI is getting close to the top though, Looking to add a little more when it sells off a little intradayTrade closed: target reached
Initial target has been reached. Will post a updated version of this trade with the next steps over the weekend.Trade closed: target reached
Closing the rest of positions today. Retrace back down is highly likely.
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