9/26/2019 - Trading Lab Morning Email
Each morning my job is to write something thought provoking and/or insightful. It is then up to you to determine what you choose to do with that information. This morning I am sharing a daily chart of the GDXJ (junior gold miners ETF) which illustrates that a mature topping pattern (complex H&S) has been hammered out, and yesterday's bearish trading session makes it a lot more likely that this pattern will be completed (with a breakdown through the neckline near $36.50):
GDXJ (Daily)
What makes the above pattern especially notable to me is the fading Relative Strength with each successive bounce. It's also noteworthy that the CMF(20) hasn't budged much and remains solidly in negative territory - this is an indication that there are high volume down days interspersed with lighter volume bounce days.
Just because I was able to draw a pretty picture of a complex H&S (double top with two shoulders) does not mean that this pattern has to complete, however, it does mean that there is significant potential for it to complete. For this pattern to remain valid the neckline will have to be snapped within 2-3 weeks (the longer it takes the play out the less likely that it will), and IF it does break that neckline the bad news is that it will target a move back down to the $30 area, potentially even lower.
I share this chart as food for thought and not as a prediction that GDXJ will fall to $30 in October. It could happen, but we could also get a rally to new highs (above $43) that could make this whole "topping pattern" morph into a continuation pattern.
As I have stated a few times recently, my crystal ball has been a little cloudy lately. Stay flexible and open to different possibilities. Doing nothing is a viable option, as is raising some cash.
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. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. 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.
