Precious Metals’ Sector Morning Star Reversal At Trendline Support

April 24, 2019
Technical Analyst & Author

Having artfully freaked out a whole bunch of investors by breaching nearby support and dropping quite sharply, so that they have panicked and scurried over to the wrong side of the boat again, the PM sector appears to be in the process of reversing to the upside now right where we would expect it to – at the lower boundary of its main upside channel, which we can see to advantage on the 1-year chart for GDX below.

There are several bullish factors to observe on this chart that are supportive of a reversal here. GDX is clearly oversold now after its sharp drop of the past two weeks and is in a zone of strong support arising not just from the lower boundary of its upside channel but also from the support in the vicinity of its October peak and the proximity of its 200-day moving average, all of which makes a reversal here very likely. In addition notice that there has not been a commensurate drop in its volume indicators, which is positive.

The 6-month chart enables us to examine recent candles in detail and the most striking thing to observe is the “Doji Star” that formed yesterday after an opening gap at trendline support after a chain of down days. This is a clear sign that bears are losing control and it is thought highly likely that this is the 2nd candle of a 3-candle “Morning Star” reversal, and if it is the sector won’t stay down here for long.

So there you go – the conclusion is that this is a great time to wade in and load up on the strongest PM stocks, like Wheaton Precious Metals that we are looking to buy back having sold it right at the top several weeks back and which we are going to look at a little later this morning.

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Clive Maund

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

Gold weighs 19.3 times as much as an equal volume of water.

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