The Bullish Percent Index (BPI) for the gold sector just generated its second buy signal for 2017.
A BPI illustrates the percentage of stocks in a sector trading with bullish chart patterns. It’s a measure of overbought and oversold conditions.
In most cases, a sector is overbought – and subject to a correction – when the BPI rallies above 80 (meaning 80% of the stocks in the sector are trading in bullish technical patterns). A sector is oversold when the BPI dips below 30. And the BPI generates a buy signal when it turns higher from oversold conditions.
Here’s how the Gold Miners Bullish Percent Index ($BPGDM) looks now…
In November, $BPGDM dipped below 30. That’s an oversold condition – indicating that less than 30% of the stocks in the gold sector were trading with bullish technical formations.
But yesterday, $BPGDM turned higher from oversold conditions and generated only its second gold stock buy signal of 2017.
The last buy signal we got from this indicator was back in July. Gold stocks – as measured by the VanEck Vectors Gold Miners Fund (GDX) – rallied 16% in just two months back then. A similar move this time would have GDX rallying above $26 per share by February.
There’s no guarantee, of course, that this $BPGDM buy signal will play out the same way. But, after declining for several months, the gold sector has plenty of energy to fuel a strong rally.
Best regards and good trading,
Jeff Clark
Reader Mailbag
Will you be buying gold stocks now that this rare gold signal has flashed? Or is there something else you’re waiting to see first?
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