At the moment I am writing this GDX ( gold miners ) ETF is trading at $23.74.

That is 91.45% up from the low made on January 19th this year.

 

Long Term View

 

90% up in 3 months. Amazing move.

But pales in comparison to the bear market that preceded it.

Gold miners ETF went down from $64.51 to $12.40 over more than 4 years.

 

5-year weekly chart

Top to Bottom

 

Current up move as huge as it is has only retraced around 1/5 of the down move ( math can be deceiving ).

The run up is very typical for the 1st leg of a new bull market, very strong and straight up without any significant pull-backs not giving much chance for bears to cover or new money to buy in.

Everybody is waiting for the pullback that never comes and eventually give up and buy high which results in a climax short term top.

 

The Clue to Buy Gold Miners

 

GDX has been trading against trendline resistance since the summer of 2014 providing two very good shorting opportunities market with number 3 and number 4.

Trendlines are usually only useful for the 3rd point trade, this one gave was fruitful for one more.

Once it made the double bottom in January this year and rallied toward the trendline it was a good clue the trend is changing.

When it finally broke out ( just above $16 level ) it never looked back. Very strong move since.

 

5-year weekly chart

Breakout

 

The another clue was clearly seen on a daily chart in the form of a double bottom pattern seen on the next daily chart.

The signal triggered at $16.90.

 

Daily chart

Double Bottom

The Roadmap

Move from January lows is in my opinion impulsive and likely the first leg of a new multi-year bull market.

However, it has gone very high in a very short period making it very overbought.

 

10-year weekly chart

RSI

The above chart shows previous weekly RSI9 readings above 70.

All were followed by some degree of a down move and current conditions are the most extreme among all observed.

The strength of the move indicates further strength longer term but likely a corrective move first in the short term.

I am long one gold miner stock: AngloGold Ashanti (AU) at the moment and will scale down here within the long term strategy and take profit within the short term strategy while keeping an eye on it to add back on a pull-back.

 

Disclaimer: This is not investment advice. 

All information should be used for educational and informational purposes only.