More progress to at least 35.68, the Hidden Pivot target of the reverse pattern shown, seems all but certain, but it's what happens after that that can help us gauge the strength of the uptrend begun in early October from around 30. The first peak lies at 36.85, an 'internal' high just 17 cents above the target. The second, an 'external' that should offer more resistance, is at 36.14. It is important because a push past it would generate the most powerful impulse leg we've seen in this vehicle since early spring. That would set up a likely test of the 39.70 peak from mid-July and thence a possible run-up into the low-to-mid-40s. ________ UPDATE (Nov 24): A push past the 36.14 peak note above appears imminent. However, I will be paying close attention to whether the rally stalls at 36.61, a voodoo number that is shortable with a reverse-pattern trigger interval of 50 cents. _______ UPDATE (Nov 28, 4:42 p.m.): GDXJ has blown past the p=36.28 midpoint resistance of this pattern with such force that the 42.09 rally target I first identified here six weeks ago in mid-October should now be viewed as all but certain to be achieved.
The clock ran out on GDXJ when it was in the throes of a snapback rally following a dip beneath two 'internal' lows recorded around Halloween. The day ended in a 'discomfort zone' bounded by the lows and another at 32.05 from October 12. That makes it tradeable, but not by way of easy instructions that I could proffer a day in advance. However, if you're proficient at fashioning reverse triggers, you can try a 37-cent trigger interval from any low that falls in the range 32.15-32.44. _______ UPDATE (Nov 14, 8:15 p.m.): GDXJ blasted off with a gap opening, denying us, and nearly everyone else, a chance to get long. That could give the rally a little staying power, although I doubt it will get very far due to the two previous failures to poke above mid-September's 36.14 high.
At last! Friday's heroic leap spiked GDXJ through the upper trendline of a longstanding channel that was featured here last week. Even more encouraging was the close above it, although the rally fell 29 cents shy of an 'external' peak at 36.14 recorded on September 15. It will need to be exceeded to create an impulse leg we could trust. Better still would be a move surpassing a second peak of somewhat higher degree at 37.08 from August 30. But any move above the lower peak would allow us to view even significant weakness subsequently as merely corrective.
The October 20 rally top at 35.36 failed to impulse above some peaks from mid-September, casting a shadow on the chart shown. This dour price action will likely have consigned GDXJ to a test of the midline of a channel that has contained this vehicle's ups and downs for the last six months. However, since my outlook for gold and silver is bullish, I expect the midline to hold and to support a bounce that breaks out of the channel. My minimum upside objective thereafter would be 42.09, the 'D' Hidden Pivot target of a reverse pattern flagged here earlier.
It's going to take investors a while to get used to the idea that higher gold prices must eventually produce higher prices for mining stocks. However, their skittishness is understandable, given the pounding, false starts and countless disappointments gold bugs have endured since prices topped in 2011. This phase of the fledgling bull market targets 72.73 (monthly chart, A=19.52 in March 2020). However, for reasons of practicality and tradeability, we can use the daily chart shown (inset), with a 42.09 target and minimum upside over the near term to p=36.28.
Inspired by gold's ballistic move on Friday, I've used an ambitious reverse pattern to project a 42.09 rally target. It is clear and compelling, implying it will work not just for getting trend and targets precisely right, but enabling some profitable trades along the way. The red line (p=36.28) should produce a stall, possibly tradeable, since it closely coincides with a 'voodoo' resistance. Still less uncertain is that GDXJ will achieve the midline, a 7% move from here.
The monthly chart offers a sobering perspective on what it would take to put GDXJ back on the bullish track it rode to $66 in 2020. This gold vehicle has been mucking around in no man's land ever since it tripped a theoretical buy signal at x=37.41 in 2014. The 49.02 midpoint Hidden Pivot will be a crucial threshold, but it lies 54% above, so there's no point in thinking about it now. A more realistic number is 33.79, a tick above a small but technically significant look-to-the-left 'external' peak recorded on September 25.
GDXJ was headed higher when the week ended, but the chart suggests this was no reason to celebrate. Although a strong rally to the green line would set up an appealing 'mechanical' short, I doubt it will get there. That means we could try to squeeze off the short at the red line, a type of trade we don't do that often. The stop-loss would be at 34.87, calculated by taking a third of what we stand to gain if this vehicle eventually drops to D= 30.36. Eagle-eyed Pivoteers might notice that the impulse leg is not strictly kosher, since the would-be 'external' low at 34.04 recorded on March 16 is in the shadow of June 29's 33.95 low.
We're long 400 shares from a 'mechanical' buy at the green line (x=34.60). Friday's bull-trap rally on the opening bar strongly implies GDXJ will take out at least another low or two before it can get traction. So that we don't get caught like everyone else in a stressful second-guessing game, I'll suggest sticking with the 34.11 stop-loss I posted in the chat room on Thursday. My hunch is that a more tradeable low will occur near 33.21 (60-min, A=36.80 on 9/1). We can try again to get long there rather than suffering-and-shuffling along with the herd in the meantime. _______ UPDATE (Sep 25, 10:04 p.m.): Today's nasty dive stopped out the trade for a loss of about $200. This is a sign of rotten health, considering the textbook appeal of the pattern we used to get long 'mechanically,'
GDXJ is all but certain to rally to at least 36.78, the D target of the pattern shown. Bulls clinched that outcome on Friday when they blew past the 35.52 midpoint resistance with a gap-up opening and never looked back. But what happens thereafter will tell us whether the rally is any different from umpteen previous rallies that ended in disappointment. An easy move through the target would suggest the uptrend is getting legs for a shot at significantly higher prices. An uncorrected continuation that tops July's 38.09 peak would strongly suggest bulls have returned in force. _______ UPDATE (Sep 19, 10:20 p.m.): If you missed boarding at the 9/7 low, this vehicle will become an opportune 'mechanical' buy if and when it gets down to x=34.60. I'd suggest buying stock (stop 33.86) or naked-shorting puts, but buy calls only if using a small-pattern (i.e., camouflage) trigger that can get you in near the exact low, time-wise.
