The Gold Miners Have Run Into A Steel Wall of Resistance
The gold miners have bumped their head up against resistance for 3 consecutive trading sessions and today’s large bearish engulfing candlestick may signal that a correction is underway for the best performing equity sector of 2016:
The ~$21 level in GDX is significant for a number of reasons:
- It represents the measured move target from the multi-month rectangle base breakout (above ~$17)
- Previous resistance from May 2015 and previous support from summer 2013 and summer 2014
- Not only is the $20-$21 an important area of support/resistance, it also represents the largest volume-by-price zone in the last five years
To add to the case for a pullback in the GDX, in his latest presentation respected hedge fund honcho Jeffrey Gundlach recommended trimming holdings of gold miners despite the fact that he still sees gold going to $1400.
I expect roughly a further 10% of downside in GDX over the coming days/weeks with a dip back into the $17s representing an opportunity to reload long term long positions in a sector that has put in a major bottom.