After rolling over in April 2022, the VanEck Gold Miners ETF (GDX) bottomed out in October.
From there, an increase in buying momentum led GDX to surge 55% to its peak earlier this year.
But as that buying momentum dried up, GDX rolled over again.
When we checked out GDX on March 7, it had fallen into oversold territory and was showing promising signs of a bounce.
Although this early up move initially failed, GDX has since burst higher.
So today we’ll see what’s in store from here…
Diverging and Converging Patterns
The chart below shows the downtrend that followed GDX’s peak (‘A’) in April 2022.
GDX’s down move began with the Relative Strength Index (RSI) reversing from near overbought territory (upper grey dashed line).
The RSI then broke down through support (green line) and bearishly remained in the lower half of its range…
VanEck Gold Miners ETF (GDX)
Source: eSignal
After the 10-day moving average (MA – red line) crossed below the 50-day MA (blue line), it continued to track below it for the rest of GDX’s down move.
But this time, the RSI formed a ‘V’ and rallied out of oversold territory (lower grey dashed line). This saw GDX start to build support in October.
From there, GDX’s rally coincided with two bullish technical signals…
-
The 10-day MA broke above the 50-day MA, then both trended higher.
-
The RSI kept building momentum and was able to gain traction in its upper range.
However, another RSI pattern led GDX to peak and reverse at ‘B’ on March 7 (red arrow).
While the RSI was making lower highs (lower left orange line), GDX was making higher highs (upper left orange line).
This down move then dragged GDX lower until the RSI was able to form a ‘V’ in oversold territory. Then, the RSI tracked back toward resistance, and it seemed GDX was about to rally.
However, this initial rally turned out to be a false move. Both the RSI and GDX soon turned lower.
Take another look…
VanEck Gold Miners ETF (GDX)
Source: eSignal
Next, the RSI made a higher low (lower right orange line) while GDX made a lower low (right upper orange line). GDX reversed again, but this time it went higher.
Remember, these reversals with the RSI apply to both diverging (left orange lines) and converging (right orange lines) patterns.
And now, the RSI bullishly broke back up through resistance, sending GDX higher.
So, what can we expect from here?
Free Trading Resources
Have you checked out Larry’s free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just click here to check it out.
Watch for Potential Reversals
For GDX’s rally to develop further, the RSI must remain in its upper range. This is what happened when GDX’s previous rally gathered pace from November until early 2023.
And the longer the RSI can remain in its upper range, then the longer GDX’s rally could be.
If the RSI gets overcooked and rallies into overbought territory, we need to look out for any potential reversals. I’ll also be watching our two MAs…
Recently, GDX closed above the 50-day MA. If the 10-day MA breaks back above the 50-day MA, and both turn higher, then that’ll add further weight to GDX’s rally.
Then, the next test for that rally would be for GDX to take out its January peak at ‘B.’
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
Reader Mailbag
In today’s mailbag, a One Ticker Trader member thanks Larry for his trading guidance…
Dear Larry, I am very appreciative of your service. Several good wins from you. I also appreciate your thoughtful videos and commentary newsletter. I trust you. Thank you again.
– Terry M.
Thank you for your thoughtful comments. We look forward to reading them every day at [email protected].