Jordan Roy-Byrne: With recoveries come questions. Will this last? Is this just setting up a bigger decline? The current recovery in the gold stocks has been both strong and broad based. It has occurred at a time when Last week we wrote: “Technically, the gold stocks continue to follow a typical post-bottom rebound path and look very strong. The daily RSI of GDX is at a 10-month high as GDX consolidates around $30. We’d love to see GDX consolidate for a few weeks but it may break above $31 within days.” On Monday and Tuesday GDX traded up to $31 but failed to close above it. Tuesday we saw a nasty bearish reversal which confirms that GDX over the very short-term will correct and consolidate its gains. This is good news as it will alleviate the overbought condition and put the market in position to launch a sustainable breakout around the end of September.
In the chart below we plot GDX (large miners), ZJG (Canadian mid-tiers) and SIL (silver stocks). In previous writings we’ve noted the importance of the 50-day moving average in the formation of bottoms. We’ve said that the test of a rising 50-day moving average confirms the bottom and provides a buying opportunity. As of a few days ago, precious metals shares were trading well above their 50-dma’s. Many stocks were up 50% from the August low in only ten trading days. Thus, it only makes sense that these markets digest those gains and test support.
GDX closed Wednesday at $28.30 while its 50-dma is at $26.19 and rising. ZJG closed at $9.09. Support is at $8.50 and ZJG’s 50-dma is at $7.91 and rising sharply. ZIL closed at $15.46 and has support at $14. Its 50-dma is at $13.19 and rising sharply.(...)Click here to continue reading the original ETFDailyNews.com article: Another Chance Coming To Buy Mining StocksYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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