After a rough three weeks in which the gold miners shed ~20% of their value there are some green shoots that sprouted this week which offer some reason for optimism. The $20 level on GDX has represented major support/resistance for the last three years and this week the GDX formed the early makings of a double-bottom at this level:
If we zoom out to a longer term chart we can see that the support around $20 represents the largest volume-by-price bar of the last couple of years. In addition, the recent lows occurred amid multiple bullish divergences (relative strength, money flow index, and volume):
GDX (Daily 2014-2016)
There has been a lot of damage done and this potential double-bottom is still in its early stages, however, this is something worth keeping an eye on over the coming days and weeks. It’s also worth noting that GDX rose by more than 50 basis points in holiday shortened trading while gold fell by more than 50 basis points – outperformance by the miners relative to gold following large declines in the sector has often proven to be a bullish omen.
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