Mining ETFs: Headed For Their Next Slide?

The mining ETFs (the GDX and GDXJ) have hit resistance and look tired. After their corrective rally, a slide looks promising.

The miners are done correcting and if they were at a water amusement park, would they head for the lazy river? How about the wave pool? Nah… they’d be headed straight for the slides.

If you’ve been waiting for a high-quality sign that the next big move in the precious metals sector is underway – you just got it.

There are days on the markets when nothing happens, there are days when what happens is visible only to some (like Monday’s session), and there are days when the market’s signals are crystal-clear – as if the charts were practically screaming at the person examining them. Yesterday, was one of the latter kind of days.

Without further ado, let’s take a look at the key development that we just saw in the precious metals’ world – the big decline in the GDX ETF – proxy for mining stocks.

ChartDescription automatically generated with medium confidence

After the tiny breakdown that I described yesterday (Mar. 24), the GDX ETF declined significantly, and it even opened the session with a price gap. If you look at the left side of the chart, you’ll see that this is the way in which the big January decline started. In the next 2 months, the value of the GDX ETF declined by over $8.

But is the corrective upswing really over? Did the move higher end at a price level that was likely to stop it? Yes, definitely so.

ChartDescription automatically generated

On March 10 (when we were already long), I wrote the following:

Even though gold moved lower in early March, gold miners stopped declining after reaching my target area based on several techniques – most importantly the 50% Fibonacci retracement based on the entire 2020 rally, and the previous lows and highs. Just as miners’ relative weakness had previously heralded declines for the entire precious metals sector, their strength meant that a rally was about to start. And that’s just what we saw yesterday (Mar. 9). 

Ultimately, it seems that the above corrections will result in the GDX ETF moving to about $34 or so.

The resistance levels in the $34 - $35 area are provided by:

  • The late-February 2020 high
  • The rising neck level of the previously completed head and shoulders pattern
  • The analogy to how big miners’ correction was in April (assuming that the mirror similarity continues)
  • The declining blue resistance line
  • The 50-day moving average
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Disclaimer: All essays, research, and information found on the Website represent the analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong ...

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