A Tantalizing Trading Opportunity in Gold Miners

posted in: GDX, Gold, Gold Stocks | 0

Gold miners as represented by the GDX are threatening to fall for the 6th consecutive trading session after they were once again repelled near the $20 support/resistance level:

 

GDX_Daily_3.31.2015

A fun fact is that even during the gold mining bear market of the past 3 years the GDX has only fallen for 6 consecutive trading sessions on 5 occasions and the results in terms of what transpired over the subsequent 5 trading sessions after this occurred is nothing short of remarkable:

 

GDX_3-year_Backtest

 Source: paststat.com

Despite the relatively small sample size, the ridiculously large profit factor cannot be ignored, particularly when laid against the backdrop of a vicious bear market.

Moreover, the series of higher lows since the November bottom remains intact for the GDX:

GDX_higher_lows

A breakout above the downtrend line drawn from the January high which roughly coincides with the $20 resistance level would be highly noteworthy to say the least.

From my perspective a long trade in GDX from current levels (especially if we see another down close today) is quite attractive. One can place a stop loss below the march low and risk roughly $1.25/share while easily target $3-$4 of upside on a swing trade time frame (1-3 weeks).

Full Disclosure: The author of this post was long shares of GDX at the time of writing