The Bullish Percent Index (BPI) for the gold sector just generated its first buy signal for 2018.
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 August, following an ugly decline in the gold stocks, $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 on Tuesday, $BPGDM turned higher from oversold conditions and generated only its first gold stock buy signal of 2018.
We got two buy signals from this indicator in 2017. Here’s how the VanEck Vectors Gold Miners Fund (GDX) performed following each of them…
GDX rallied 16% in just two months off of the July 2017 buy signal. The sector gained 12% in about six weeks off of the $BPGDM buy signal in December. A similar move this time would have GDX rallying above $21 per share by November.
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
P.S. I truly believe the stock market is about to hit a MAJOR turning point. So much so, I’m giving my first public presentation in over two years.
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Reader Mailbag
In today’s mailbag, one reader responds to yesterday’s essay on natural gas, offering a contrarian stance…
Be careful with your Nat Gas call. The federal government of Canada has just released news that they have reduced the tariff on the steel required to build liquefied natural gas (LNG) tanks for a British Columbia gas facility. This is a big outlet for Canadian gas down the road.
– Martin
And another shares their own take on the action…
I’ve been stuck in a UGAZ [VelocityShares 3X L Natural Gas] position for months as I didn’t want to take the loss by selling. The market has been kind to me this week. Although UGAZ hasn’t returned to break even, I am selling incrementally as the price comes up.
The fundamentals support a higher price as storage is low going into a high-use part of the year. It is a mystery why prices haven’t come up sooner and faster. I think the market has not accounted for take away capacity limitations in the gas fields nor increasing exports and summer cooling demand. Natural gas should be much higher this winter.
– Bret
As always, send in your trading stories, questions, or suggestions right here…