GDXJ Signals Major Breakout And Strong PM Sector Advance Imminent
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Most investors or would-be investors in Precious Metals stocks are so soured by the seemingly interminable bearmarket in the sector, that has gone on for 3 years now and been made even worse by its having unfolded against the background of a rising stockmarket, that they won’t see the major opportunity now being presented, even when it’s as plain as the nose on your face, which it is. This is a bit sad really, because huge profits look set to be reaped by those buying the sector now.
The charts below make it crystal clear that we are on the verge of a major bullmarket advance across the PM sector. While these charts are for the Market Vectors Junior Gold Miners ETF, GDXJ – what happens to this has major implications for the whole sector, for the simple reason that this is not going up without the entire sector going up too.
The 5-year chart clearly shows an orderly 3-year long bearmarket, with a Head-and-Shoulders bottom forming over the past year, that is now at the point of completion. The volume pattern is strongly bullish, with the persistent heavy volume all this year being a sign of a bottom, and the record volume last week as the price rose up out of the Right Shoulder of the pattern marking the start of an expected breakout drive out of the base area, and out of the downtrend – a development that can be expected to trigger a wave of buying and sharply rising prices – last week was only the beginning.
We can see the Head-and Shoulders bottom in much more detail on the 2-year chart. There was huge record volume on last week’s rise out of the Right Shoulder low of the Head-and-Shoulders bottom pattern, that caused volume indicators to spike quite dramatically. This is VERY bullish price/volume action. We were looking for this sort of development in the PRECIOUS METALS SECTOR KEY UPDATE – it’s always darkest before the dawn, posted on the site on 22nd May.
The short-term 6-month chart shows that GDXJ has become short-term overbought after last week’s sharp rally, but that is not expected to stop it for long – after consolidation or a minor reaction it should continue to make strong gains.
In response to all this we yesterday looked at a range of promising silver stocks on the site, starting with silver stocks because they are the most volatile. Next we will move on to look at a range of gold stocks.
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Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.
Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.
The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.
Visit Clive at his website: CliveMaund.com
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