Identifying bottoms is never easy in the metals, since they usually churn for a while, knocking everyone off before they finally make upward headway. This trend is quite unlike the stock market, which rockets out of cycle lows (as we’ve seen recently post-election).
Most of the basic technical indicators for GDX have triggered buy signals. GDX’s relative strength indicator (RSI) has emerged from oversold conditions, and is showing a new bullish slant. The true strength index (TSI), which measures oversold and overbought conditions, is also on a buy signal.
We aren’t yet seeing a buy signal on the MACD, although there is a significant divergence there that is often seen at cycle lows. Finally, stochastics have emerged from oversold levels, triggering a buy signal.
While the miners could see some further selling in the near term, with multiple indicators lining up to paint a bullish picture, the nearly four month long purge seems to be reaching its completion.
The GDX fell $0.86 (-3.99%) to $20.70 per share in Wednesday morning trading. Year-to-date, the largest fund tied to gold mining stocks has gained 57.14% year-to-date.
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