Precious Metals Breaking Out

This is a condensed version of Rambus Weekend Report. There are over 20 individual PM stocks individually updated in the full version.

I would like to start out this Weekend Report by looking at a long term monthly chart for the GDX. The multi-year bear market actually began in September of 2011 at the head portion of the 3 1/2 year H&S top. The H&S top actually began to form in September of 2009 and ended in February of 2013 when the price action broke below the neckline. From that point, the GDX declined for the next three years in its bear market so from a technical perspective the GDX ended its bear market in January of 2016 which marked its all-time low.

The rally out of the 2016 low lasted seven months and ended in September of the same year. After a strong impulse move like that one looks for the price action to consolidate its gains before moving higher. There was no way to know at the time what trading range would develop and how long it will take to complete. Now in hindsight, we can see the GDX built out the 2016 bullish falling wedge, that we’ve been following for well over a year, which took two years to complete from the August 2016 high to the September 2018 low. It wasn’t until the breakout above the top rail of the 2016 bullish falling wedge and the completion of the backtest two months ago in May that we had significant confirmation that the bear market that began in September of 2011 was officially over.

Now that we know the bear market is officially over depending on what matrix you want to use, calling 2016 low the beginning of the new bull market or the completion of the backtest to the top rail of the 2016 bullish falling wedge in May of this year the completion, the bottom line is that it’s time to start thinking in bull market terms leaving the bear market logic behind.

After five months of the breaking out and backtesting process out of the way, the GDX has created a new high this month keeping the new uptrend intact. So if we are going to start playing by bull market rules we can now do a measured move to see how high the power of the 2016 bullish falling wedge can take the GDX. The measured move I’m showing on this weekly chart is called an impulse measured move which measures each half of the impulse move with the 2016 falling wedge being the halfway pattern. The first two blue arrows measure the first impulse leg up from the 2016 low to the August 2016 high. The second set of blue arrows on the right side of the 2016 falling wedge measures the second impulse move which has a price objective up to the 43.57 area.

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