Knock Three Times …

Gold, GDX Warning: Breakdown Imminent?

It’s true when price action rebounds off a level, whether support or resistance, that level is confirmed.

However, personal (mental) bias, like the rabid hyperinflation ‘dollar destruction’ gold bulls, collectively have their minds so twisted, every bounce off so called support, is a buying opportunity.

That kind of blindness can set oneself up for (financial) disaster.

Well, we’re about to see if the current bounce was a buying opportunity or harbinger of a “free fall” breakdown.

Price action’s the final say. So, let’s take a look at what its been saying about the latest move.

Un-marked weekly chart of Senior Mining (ETF) Index GDX:

Next, comes the support line and contact points identified:

Now, comes the important part. Each rebound off support has less upward travel than before:

The right-most green arrow (upward travel), may or may not be complete. One fact in favor of completion is the significant amount of resistance around GDX, 33.00.

Price action has spent six weeks transacting in this area. Three weeks above support and now three weeks below.

Positioning:

We’re at the danger point; risk of being wrong on a short position is least (not advice, not a recommendation).

At this juncture, price action does not need to go far to either support or negate a short trade set-up.

With that in mind, the Project Stimulus account is short this sector via DUST (not advice, not a recommendation).

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

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