Last month, we took a close look at the VanEck Gold Miners ETF (GDX).
After rallying strongly at the start of the year, GDX peaked in April before rolling over and heading lower.
Then from April to October, it was all one-way traffic. GDX traded down to its lowest level since March 2020.
This long grind lower happened while inflation was bursting higher. (So much for gold’s supposed “hedge” against inflation.)
However, when we checked out GDX on November 10 (red arrow on the chart below), it had just made its biggest move since February. And it was showing the first glimpse of an emerging rally.
Today, we’ll see how that move played out before digging into what we can expect from here…
Seesawing Along Resistance
The chart below shows GDX’s two clear trends prior to this current rally…
There’s the strong rally from February to April – when the Relative Strength Index (RSI) broke into the upper half of its band (above the green line).
And the 10-day moving average (MA – red line) bullishly broke above the 50-day MA (blue line).
Take a look…
VanEck Gold Miners ETF (GDX)
Source: eSignal
However, with both the RSI and GDX stock price diverging (orange lines) from one another (a common pattern warning of an impending reversal) – GDX peaked on April 18 and then started its trend lower.
The six-month downtrend that followed coincided with two key technical signals…
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The RSI fell through support and bearishly remained in the lower half of its range throughout the down move.
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The 10-day MA crossed back down and remained below the longer-term 50-day MA.
But when we looked at GDX on November 10, both those patterns were reversing.
Having seesawed along resistance, the RSI had finally made a decisive move higher and gained a foothold in the upper half of its range.
And the 10-day MA had just broken back above the 50-day MA.
Take another look…
VanEck Gold Miners ETF (GDX)
Source: eSignal
Since then, the 10-day MA has continued to accelerate higher and further away from the 50-day MA – a bullish pattern.
And the RSI has continued to track along in its upper range. As I noted previously, the longer the RSI can stay in its upper band, then the longer GDX’s rally could be.
With GDX recently breaking higher again, this uptrend is looking more established.
So, what am I expecting from here?
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A Breakout Higher
After the fresh break higher, GDX is already trading around 40% higher than its late-September low…
For that rally to continue, I’ll be looking for the 10-day MA to continue to accelerate further away (and higher) than the 50-day MA.
Having bottomed out and recently turned higher, we’ll also need the 50-day MA to continue to track higher.
The other thing I’ll be watching is the RSI…
With GDX’s recent breakout higher, the RSI is closing in on overbought territory (upper grey dashed line). And what happens here is key…
If the RSI tracks along that line without any sharp reversal, then we can expect GDX’s promising rally to continue.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
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