Gold futures are getting whacked for the 2nd day in a row with the August contract trading $1712 as I type these words. The $1700 level will be a key test for August gold, with a breakdown below this level opening the door for a deeper correction across the precious metals sector.
Turning to the daily charts of GDX and GDXJ we are likely to get a test of important technical support levels over the next few days:
GDX (Daily)
Yes, that looks like a mini H&S top on the daily chart with a neckline near $32. The only problem with this chart pattern interpretation is that the volume profile is not bearish, and it's not indicative of a true head & shoulders top (there isn't a dramatic volume spike on the left shoulder OR at any point recently).
I believe it's more likely that we get another 1-2 days of downside to get everyone bearish before major support levels get defended and prices resume their climb higher.
Turning to GDXJ, we can see the mid-tiers and juniors have begun to lead and outperform the seniors:
GDXJ (Daily)
Major round number areas of support for GDXJ are near $43, then $40. While some bulls may not like the prospect of a drop to $43, I think it would actually be healthy in terms of resetting sentiment and putting in place a stronger base from which to rally.
June is often a mixed month for the precious metals sector historically - the miners have a tendency to be more volatile in June and the strongest bullish seasonality tends to occur from mid-July until early September (buy after July 4th and sell the week after US Labor Day).
For my part, I know I want to buy against major support levels and continue accumulating my favorite junior mining stocks on dips. This afternoon at 4pm EST I will be conducting a webinar on avoiding pitfalls in the junior mining sector and finding the diamonds in the rough. Please join me!
DISCLAIMER: The work included in this article is based on current events, technical charts, company news releases, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.
