The gold miners as represented by GDX printed a bearish reversal candlestick today after making a new 20-month high earlier in the trading session:
This particular pattern is especially bearish for the following reasons:
- A new high followed by a close below the previous day’s low on heavy volume (and higher volume than the previous session).
- GDX has a strong track record of short term pullbacks after trading above its upper Bollinger Band.
- The recent highs in GDX have occurred with consecutive momentum divergences (RSI) and thinning volume.
- We have seen an increased level of acceptance of the gold rally among market participants in recent days with many suddenly holding a bullish view of the gold miners after a 92% gain within 3 months.
One day does not make a trend, however, today’s trading session is a yellow light warning signal. Let’s see how the week winds up.
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