GDX: Techniques & Technicals

A fascinating look at the Senior Gold Miners (GDX) and the shallow 23.6%, retrace.

GDX charts are presented below and also at this link where they may have more detail on the viewing screen.

First, the weekly from the last update is shown below with the area circled to be expanded.

The expanded area is the hourly chart including Fibonacci retrace levels. 

Note the top of the current move was on August 5th, which is off-chart in the hourly example.

The blue ovals show the market itself has determined Fibonacci levels. 

It’s clear that oscillations and pivot points are taking place in GDX at these levels.

One of the mysteries of the market is the Fibonacci retrace levels are being determined as the market heads lower and before a bottom is reached. 

Effectively, the market is pre-determining or predicting (by its own action) the potential end of move and beginning of retrace.

This type of action completely debunks any notion that fundamentals are somehow moving prices

Digressing for just a bit, Wyckoff’s autobiography, way back in 1902, he discovered (paraphrasing):

‘The market is operating under its own action.  Price movement has nothing to do with any real value (fundamental).’

We see that same action in GDX; one hundred-eighteen years later.

The big picture, the macro picture provides the backdrop. 

That picture today, is the situation in the bond market and the dollar.  Macro will not tell you “when”.

The chart of GDX shows us the last session, Friday, was a high probability event. 

The day before on Thursday, price action tagged the 23.6% retrace, then promptly declined.  The rest of the session was spent at the support boundary.

An estimated 15-million shares were traded at this level before breaking lower early Friday.  That support level is now resistance.

We can see the newly formed resistance being tested late Friday at the exact spot where the short was opened.

Entry price for DUST at that location was 21.34. With a stop at 20.81, it means the risk per share is 0.53. 

Hypothetically risking $1,000, on the trade would yield a position size of 1,887-shares (absolutely not advice, not a recommendation).

Because of price action at support (now resistance) there’s an extra level of protection GDX is not going to penetrate the area to the upside.

As always, anything can happen … but probabilities point lower for GDX.

Stay Tuned

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