GLD (Gold ETF) has been consolidating within this large symmetrical triangle & is poised to gap towards the bottom of the pattern (along with horizontal support) today. A daily close below the triangle might open the door for a test of the mid & late 2013 lows in GLD. If this intersecting horizontal + trendline support level around the 122.80-123 area is taken out (a daily close below), the next decent support level before a test of the mid & late 2013 lows comes in around 119.40. I favor a bounce off the 123 level but will not be adding any more exposure to gold or the mining sector should prices move below the triangle pattern.
Long-term Trades are trade or investment ideas that have the potential for significant returns over a longer-term period, typically several months or more. This category of trade ideas might be useful for the longer-term swing trader or investor looking for investment ideas to supplement their existing portfolio and prefers a less active, more hands-off approach to investing.
I didn’t hit me until I saw the Russian/Ukraine-induced reversal in GLD a few minutes ago when I checked the 60 minute chart on GLD that I had mistakenly listed the support on GLD which gold was likely to find support at earlier today. In the post that I drafted shortly before the open today I had mistakenly referred to the 124.40 support level in GLD as the 125.40 support level. I had been watching gold futures and the streaming intraday chart of GLD (shown below) and in a rush to try and get that post out as close to opening bell as possible, as I was expecting a likely reversal off the 124.40 area, I had mistakenly referred to it as 125.40 and also mistakenly added that level to the updated 60 minute chart even though GLD was trading about $1 below that level at the time as shown here in the intraday chart.
Obviously the reports of an incident with that Russian convoy in the Ukraine that hit the headlines around the time GLD bottomed today at 124.42 certainly gave some tailwinds to the bounce off that level today. Call it lucky timing or the charts playing out (or a little of both) but so far, we are now looking at a successful backfill of that large Aug 6th gap that took GLD clearly out of that 60-120 minute bullish falling wedge pattern. From here, a break above the recent highs of 126.81 would be the next buy signal in GLD while a break below the 124.40 support and especially the 123 support level be bearish.
By the time I get this post out, GLD should have gapped down at the open to around this support level that comes in around 125.40, a level defined by several recent price reactions as well as three gaps. I am viewing this as a opportunity to add some more exposure to GLD & the mining sector and as long as GLD remains above the 123ish support level, the intermediate-term outlook is intact IMO. Note, this chart was made in pre-market & does not yet show the opening prices although I have added the 125.40ish support level.
The Inverse Head & Shoulders bottoming pattern on the GDX (Gold Miners ETF) is now fully formed with volume patterns confirming this potentially powerful reversal pattern. With prices currently up against the neckline, any solid weekly close above the pattern would trigger a long-term buy signal for the miners although my preference will be to see any breakout of this IHS pattern confirmed by a bullish breakout in GLD, as per the recently discussed criteria. My price target, should both GDX and GLD confirm the long-term buy signals, would be the 38.50-39.00 area with the first and only major resistance area before then expected to come in around the 31.30ish area. As such, should both GLD & GDX trigger these long-term buy signals, my expectation would be to see the miners play out per this scenario drawn with the orange lines: A sharp move towards the 31.30 area, followed by a tradeable pullback off that resistance area, then followed by one final thrust up to the 38.50-39.00 target area.
Astute Ellioticians might notice how well this scenario fits into a basic 5 wave sequence with wave 1 (up) starting from the Dec 31st lows (i.e.-bottom of the head), wave 2 down being the move from the NL down to the bottom of the right shoulder, wave 3 up in progress now and to be continued until the 31.30sih pullback target (and yes, wave 3 would measure as the most powerful wave, should the pullback (wave 4) be relative minor as expected), and finally followed by a 5th wave up to hit the final target area of 38.50-39.00.
Sounds almost too perfect and as I always say, predicting future price moves is a lot like forecasting the weather; the cone of accuracy widens along with the time period of the forecast. e.g.- Mr. Weatherman can tell you with a fair degree of accuracy the chance of rain tomorrow and throughout the week as well as the expected temperatures but not so much what conditions will be like 3-6 months from now. As with weather forecasting, a market technician must continually revises and adjust his/her expectation of where prices are headed as the data (chart/price action) changes over time.
One final note to add: Assuming gold continues to move higher and this IHS pattern on GDX goes on to breakout soon, one variation to this scenario would be to allow for the possibility of a backtest of the neckline shortly following the breakout, a fairly common occurrence.
I haven’t had much to say regarding gold & gold mining stocks as nothing technical has changed since the highlighted bullish falling wedge breakout in GLD last week on the 60 & 120 minute time frames. That was the first bullish catalyst that I was looking for and as I’ve repeatedly stated, my primary focus is on gold prices as the miners will ultimately follow the metal.
Although we did get an impulsive breakout of that 60-120 minute bullish falling wedge, there is still some work to be done in order to solidify the longer-term bullish case for gold & the mining stocks. From here, GLD will either go on to break above the July 17th reaction high of 127.40 (bullish) and then, hopefully, go on to take out the July 10thth high of 129.21 and ultimately the March 14th reaction high of 133.69, which would be extremely bullish & most likely confirm that a new cyclical bull market in gold is indeed underway.The bearish case would have GLD making a solid break below the aforementioned 123 support level and even worse, the June 3rd reaction low of 119.42, which would open the door for a retest and possible break of the all-important mid & late 2013 double bottom.
Regarding my upside targets for the exposure that I added back to gold & the mining sector last week, here are my replies to a couple of recent inquired on both the miners as well as a specific trade (AUY):
Q: What are your GDX targets?
A: (from last week)- Potentially much higher. This was my buy-back-in for the next leg up in the metal & miners this week. Given, there is still a lot of technical work to be done, the first major step being a break above the July 10th highs in both GLD & GDX. As of now, my main focus is on loss mitigation (stops) if my analysis looks to be wrong & the metals & miners look like they might go much lower. The a break of the recently highlighted support levels on GLD & SLV would most certainly be bearish. Targets TBD later, for now just watching the price action in gold & silver.
Q: AUY appears to be breaking out. What are your target(s)?
A: Thanks for asking as you just made me realized that I never updated my stockcharts.com chart on AUY from the Live Charts page. I just updated that chart which you can view in the link below or via the Live Charts page. These are the same target levels that were posted on the April 16th entry for the trade, which I still think are valid. I plan to add some suggested sell (price) levels but for now, the horizontal lines mark the resistance levels for the targets.
ANR (Alpha Natural Resources) is one of several long-side trade ideas currently on my watchlist that are showing some bullish developments on both the daily & weekly time frames. With many of the coal stock firmly entrenched in a bear market, these should be considered counter-trend, fairly aggressive trades at this time. For those who may have an interest in the coal stocks, to help adjust position sizing for each trade idea in order to account for the total target exposure to the sector, I currently have six coal stocks on my watchlist that are at or close to triggering an entry that may also be added as Trade Setups and/or Active Trades soon. In addition to the potentially bullish developments on those individual coal stocks, the DJ US Coal Index may be forming a right shoulder of an Inverse Head & Shoulders bottoming pattern following a divergent low at the formation of the head.
ANR will be added as long entry here around 3.60 following yesterday’s breakout on average volume. Suggested stops for those targeting T1 (4.08) would be below 3.40 while longer-term traders targeting T2 or higher (additional upside targets likely to be added) might consider a stop below 3.10 as well as considering a scale-in strategy to allow for a possible backtest of the downtrend line. The last trade on ANR was entered on a break of this downtrend & hit T2 for a 34% on Nov 4th. ANR is once again being added as both a typical swing trade (Active Long) and a Long-Term Trade idea on this breakout. However, longer-term & more conservative swing traders might wait for a solid weekly close (end of day Friday) before establishing a position. click here to view the live daily chart of ANR click here to view the live weekly chart of ANR click here to view the live weekly chart of the DJ US Coal Index
GLD made a solid gap higher at the open today, breaking above the wedge and most likely kicking off the next leg higher in gold. Although my recent focus with GLD has been on the intraday charts (60 & 120 minute), that was merely to time my re-entry back into the trading positions in the metals & miners that I booked profits on in late June. Therefore, my focus will now turn back primarily to the daily charts, watching for a break of the July 10th reaction high as the next bullish event for GLD. SLV also made a nice gap up today but has quite a bit more work to do from a technical perspective as it still has yet to take out the top of the June 19th gap (defined as S1 on my previous 60 & 120 minute charts).