The gold miners as represented by the GDX have been running up against resistance in the $25-$27 range for the past couple of months. Already a significant amount of volume has been churned above the $25 in GDX and there is now potential for the next breach of $25 to the downside to carry with it a substantial wave of selling pressure as ‘trapped longs’ throw in the towel and liquidate positions out of concern that a deeper correction may be underway:
GDX (Daily)
This dynamic creates an increasingly tenuous situation; the gold miners have a strong historical track record of putting in a major seasonal low between mid-June and mid-July, however, a breakdown below $25 in GDX would likely result in at least an additional 10% of downside.
This week could be a very interesting one from a technical perspective in GDX. Gold futures have opened down more than 1% in Asian trading after briefly breaking above key resistance at $1308 last week and making 22-month highs:
Gold August Contract (Hourly)
A move below $1280 will go a long way towards confirming that Thursday’s move up to $1319 was a failed breakout and will likely trigger a sharp move lower in the gold miners.
As always we will be monitoring gold and the miners closely and posting trade setups, triggers, and analysis in the ‘Trading Lab’ over at CEO.CA. To get all of our trades and receive our daily morning market emails sign up using the PayPal button below!
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