Look at this updated chart of the bullish percent index for the gold sector (BPGDM)…<\/p>\n
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The BPGDM measures the percentage of gold stocks that are trading in a bullish technical formation. It’s a gauge of overbought and oversold conditions.<\/p>\n
Since it’s measured as a percentage, a bullish percent index can only reach as high as 100% or fall as low as zero.<\/p>\n
Typically, a sector is extremely overbought when its bullish percent index rallies above 80%. It’s extremely oversold when it drops below 30%. <\/p>\n
Trading signals are generated when the index reaches extreme levels and then reverses. But, that’s not a HARD rule.<\/p>\n
Technical analysis is much more of an art than a science. So, we have to allow for some “wiggle room” on the indicators.<\/p>\n
The BPGDM never reached 80 before it reversed lower. It didn’t technically<\/em> generate a sell signal. But, traders who allowed for some wiggle room would have avoided the 13% decline in the gold sector over the past month.<\/p>\n Now we need to allow for some wiggle room on the buy side as well.<\/p>\n The BPGDM closed at 54 on Wednesday. That’s still well above the 30 level that indicates extremely oversold conditions. So, there’s room for the gold sector to work even lower.<\/p>\n But, we probably don’t need to see the index dip below 30 before buying the gold stocks again.<\/p>\n Since the BPGDM didn’t technically<\/em> generate a sell signal last month it may not, technically<\/em>, generate a buy signal before the gold sector starts to move higher again.<\/p>\n <\/p>\n Free Trading Resources<\/strong><\/p>\n Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n <\/p>\n Folks who were looking to buy gold stocks last month certainly have a much better opportunity to do so today.<\/p>\n We still might see some additional weakness in the sector in the short-term. But, the longer-term outlook remains quite bullish.<\/p>\n Traders should consider using any weakness in the gold stocks over the next few days as a chance to add exposure to the sector.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n <\/p>\n![\"Signature\"](\"https:\/\/files.jeffclarktrader.com\/global\/signatures\/jeff-clark-signature.png\")
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