From the Desk of Ian Culley @IanCulley
The pieces of the puzzle are falling into place.
Gold priced in USD has finally joined other global currencies, closing last week at an all-time high. Silver, the high-beta play, is outperforming its more reserved cousin (gold). And gold mining stocks are breaking out.
Many of our trade ideas over the past few weeks are working. I believe this trend has just begun and could last for months – or even quarters.
Especially when I consider this next chart…
Check out the VanEck Gold Miners ETF $GDX filling the first of a series of downside gaps:
These gaps represent strong selling pressure during the early stages of last year’s sell-off when the bears were in full control. But in the interim, GDX carved out a multi-month base, repairing the damage.
Now that the gold bugs have filled the first gap, I’m focusing on the 37 level. A decisive break above that level signifies a close of the breakaway gap that kicked off last year’s downtrend.
It also coincides with fresh 52-week highs for GDX, lending credence to the bearish-to-bullish trend reversal underway – a trend reversal on both absolute and relative terms…
Here’s GDX violating a two-year downtrend line versus the S&P 500 $SPY:
The strongest uptrends catch higher on absolute terms and relative to their alternatives. GDX checks both boxes.
As long as that’s the case, we want to err on the side of upside resolutions among individual mining names. That approach has rewarded us in recent weeks. And I expect more of the same in the coming months.
I want to continue to buy charts like Seabridge Gold $SA, a $1B Canadian miner based out of Toronto:
But not until it breaks out, of course.
SA forms a potential multi-month base below a shelf of former highs, coinciding with a retracement level of 14.50.
If and when it reclaims that key level, I like it long toward 20.50, despite potential resistance coming in at 16.75.
I think these trends are just getting started. Mining stocks will likely rip in an environment where gold prints new all-time highs.
I’m also tracking the 14-day RSI for a reading >70 to confirm a breakout. You should consider any upside move without an overbought reading suspect. Any readings falling short of 70 would signal that the bearish regime remains intact.
Nevertheless, the bullish camp is gaining momentum.
Gold and silver are trending up and to the right. Silver is outperforming gold – a healthy sign of risk appetite. And bullish trade signals for mining stocks are firing.
Little by little, our bullish thesis for gold unfolds.
Tactically, it’s time to buy the breakouts in mining names.
Stay tuned.
Thanks for reading! As always, please let us know what you think.
Click here to watch this week’s Gold Rush Video with special guest Phillip Streible:
And be sure to download this week’s Precious Metals Report below!
Allstarcharts Team
