January Could Be A Make Or Break Month For The Gold Miners

posted in: Gold, Gold Stocks | 0

The Gold Miners ETF (GDX) has traded an enormous amount of volume in the $13-$14 price range during the last 6 months and the GDX enters 2016 experiencing some of the lowest realized volatility in history:

 

GDX (Daily)

GDX_ATR

This chart and the amount of churning within a relatively tight range inspires a few observations as we enter 2016:

  • Bottoms take months or years to form – the chart pattern in GDX definitely qualifies as a viable bottom.
  • Markets don’t give investors too much time to get in at a bottom. Which means that if the goldies are bottoming we should see a significant rally take place very soon.
  • There must be a large number of stop-loss orders placed just below the $12.50 level – A brief breakdown below $12.50 followed by a sharp upside reversal would likely inflict the maximum amount of pain and frustration.
  • Januaries have a history of providing above average volatility in the gold miners. Given the relatively placid price action in GDX recently, a volatile January would be quite fitting.