GDX is on the brink of one of most anticipated “breakouts” we’ve seen in quite a while:
There is a lot going on in the above chart and the situation is by no means clear. Here is some of what i’m looking at:
- The much talked about $20 support/resistance level is being tested yet again
- Gold miners have exhibited strength relative to gold during the past month as the price of gold has essentially gone no where
- There have been some steady signs of minor accumulation recently, however, volume isn’t compelling enough yet to have full confidence in any breakout
- Gold itself still remains near the $1200/oz level and well below the big resistance layer around $1225/oz – it’s difficult to have any confidence in a breakout in the miners until gold is in a confirmed uptrend itself
My 2 cents is that this breakout needs a little bit more time to ripen. However, at the same time I believe it is most likely to occur by way of gap which could ultimately lend even more energy to the breakout once it occurs. I will be looking for price to clear $20.50 and close above this level on at least 1.5x daily average volume (65 million+ shares). The measured move target from the recent ascending triangle targets roughly ~$22. Finally, as i’ve stated before market participants should add more weight to the next large directional move away from the $20 level in GDX simply due to the amount of time and energy that has been expended at this level.