Gold stocks have enjoyed a great run higher over the past three weeks. The VanEck Vectors Gold Miners Fund (GDX) has rallied from a low of $21.25, right before the FOMC announcement in December, to Friday’s closing high at $23.24. That’s better than a 9% gain in just three weeks.
Now, though, the gold sector is getting extended. And it’s dangerous to chase gold stocks higher right now.
I still expect the gold sector will be higher by mid-February. But for the next few days, a pullback would be healthy.
And according to the gold stock “roadmap” I wrote about last month, we should be hitting that pullback just about now.
Take a look at this updated chart of GDX…
GDX closed above its upper Bollinger Band last Tuesday. You’ll notice that when that happened in July, GDX pulled back and retested its 50-day moving average (MA) as support before blasting higher again.
Also, there’s no sign of negative divergence on technical indicators like the MACD and RSI. That supports the prospect of another push higher after any short-term pullback. Further, the 9-day exponential moving average (EMA) just completed a bullish cross above the 50-day MA. That often marks the start of an intermediate-term move higher.
We’ve had a good run in this sector over the past two weeks. Traders who are heavily exposed should consider trimming some profits here. Then we can look for a pullback towards the 9-day EMA at about $22.83, or the 50-day MA near $22.50 as a chance to add that exposure back.
Just to be clear… I’m not suggesting that you sell all your gold holdings. I think the sector could be much higher just a few weeks from now. For the very short term, though, we might have to deal with some turbulence.
Trimming some profits makes sense. But it’s not yet time to completely cash out.
Best regards and good trading,
Jeff Clark
Reader Mailbag
We read so many great emails from you over the holiday break… And we want to thank all our readers for your continued feedback and wish you all a happy and profitable new year!
Now, your takes on the last Market Minute essays of 2017…
The empty cop car is used the same way in my town. Great analogy.
– John G.
Excellent read and recommendation for a low-risk entrance to the gold market. You’re a great mentor. Happy Holidays.
– Harvey H.
Great details on gold. But I believe silver will move higher than gold on a percentage basis. It is more hated than gold.
– James B.
I want to wish you a very happy and healthy New Year to you and your family. I hope you had a very Merry Christmas to you and all your family. I really appreciate all you do for us, I look forward to reading everything from you every day! You are the BEST!
I can only put money in ETFs, I do NOT know anything about options, and maybe I am just too old to understand options. I am not in GDX, but I am waiting for GDX to go to about $22.50 support, the 50-day MA, I am hoping it gets there so I can get in this. I look forward to you saying what ETF to get into, and I am really hoping to get into GDX, I am trying to wait patiently, which is hard to do.
I truly appreciate you! You are the only honest one I can count on, keep up your Market Minute, I look so forward to that every morning. Thank you for everything!
– Dina P.
I fear the eggnog you consumed over the holidays was a bit too strong. Comparing the U.S. tax system to entrance fees at Disney… Really? No wonder the U.S. along with many other countries are facing financial difficulties with this kind of thinking and thought processing.
Going to visit Disneyland is not, and I repeat, is not a mandatory event for any family, however enjoyable as it may be. My parents could not afford such luxury. Instead, they took us camping where we all enjoyed the great outdoors, at a fraction of the cost. In other words, my parents did what they could afford to do as a family, not spent money they did not have.
This is where the governments need to take lessons from parents who are creative and live within their means. Spending money one doesn’t have can’t last forever, although with the variety of shenanigans deployed by the governments around the world, I may be proven wrong, but I don’t think so.
Please, a little less eggnog next year.
– Irene O.
You’re very bright guy when it comes to investment, but you’ve got to quit publishing these old articles. Be advised the Disney now has express passes that you pay additional for to go to the head of the line. Thus, Uber capitalism at its best and an illustration of class distinction!
– Bob D.
You should make these so they can be posted to Facebook. That explanation is something that anyone that is not an elected idiot can understand…
When I was in 7th grade in Social Studies class, the teacher was explaining about how people that made more money had to pay a larger percentage than those that make less. I immediately said that’s not fair. He replied that “didn’t I think somebody making $100,000 should pay more taxes than him as a teacher not making nearly as much?” My answer was of course they should but the percentage should be the same because the $100,000 man is working just as hard and probably harder than you as a teacher…
I’m pretty certain that there was a continued discussion because when I’m right I’m not afraid to argue about it. Of course, I was known in the principal’s office too for not conceding an argument with a teacher when I was right and they were wrong.
– Jeff E.
Not a word about the giant defense budget. Go read some history Jeff. Start with Eisenhower and his warning and coining of the phrase Military Industrial Complex in his last speech.
– Walter T.
I don’t know if you will get this reply. But thank you for this email. I thought I was going to laugh myself into a heart attack reading about the global warming tree. I wish I was as inventive. I don’t have any liberal friends and along with my lack of imagination, I never needed to figure out how to be politically correct.
The survivalist tree was good also. I agree wholeheartedly. Which is why I don’t have any liberal friends. Along with the fact that I would hate to have to shoot them when they come begging because they didn’t prepare.
– Edward K.
The real deal Teeka Tiwari mentioned that you are the real deal. And I want to learn options, so thought you are a good opportunity for a great start. I’ve subscribed to your service.
I like your welcome, the simple PDF guide, and the honesty about the process of good trading with safety. I’m experienced in stocks, but not in options. I always thought about synthetic option strategy able to grasp wide price movement without risking much and able to profit every scenario.
– Niccolo D.
As always, feel free to send in your trading stories, questions, and suggestions right here.