And with the commercial trader net short position dropping to just 2,000 futures contracts (its smallest short position ever), we had a pretty good setup for calling a bottom in the gold stocks<\/a>.<\/p>\n Gold stocks then put on a blistering rally. GDX gained almost 10% in about one week. But, as is often the case when an oversold sector makes its first bounce off of the bottom, GDX ran into resistance. <\/p>\n Before we could declare a “real” bottom was in place, GDX would have to come back down and form a higher low on the chart.<\/p>\n That appears to be what happened last week. Take a look at this GDX chart…<\/p>\n The chart now has a higher low in place. That’s bullish, of course, since it supports the idea of the September low marking an important intermediate-term bottom for the sector.<\/p>\n More impressive, though, is this chart now appears to be forming an inverse head and shoulders pattern. This is a reversal pattern that typically plays out as a stock moves from a bear trend to a bull trend. If GDX can close decisively above the neckline of the pattern, and above its 50-day MA (at about $19.30), then we could see a sharp, continued move higher.<\/p>\n In that case, the potential target measures to $20.50 per share over the next two to three weeks. By then, if this move plays out, the 9-day exponential moving average (EMA)<\/a> will have likely crossed above the 50-day MA – which shifts the intermediate-term trend to bullish. And then we can start talking about longer-term price targets.<\/p>\n For now, though, I like the potential of this chart pattern to produce a decent rally over the next two weeks or so.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n If you’re a Delta Report<\/em> subscriber, don’t forget… Tomorrow at 1 p.m. ET, Jeff is hosting a live Q&A where he’ll answer all your submitted questions, off-the-cuff and unscripted.<\/p>\n This may be your only chance to ask him whatever you want to know about option trading, his market outlook, and even new features he’s planning for the Delta Report<\/em>. To submit your questions before tomorrow, click here<\/a>.<\/p>\n![\"\"](\"https:\/\/jc-stable.s3.amazonaws.com\/ee-assets\/channels\/articles\/mm\/201810-mm\/20181003-MM-01.png\")
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