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  Gold & Gold Stocks Grinding Out a Bottom  
  Jordan Roy-Byrne CMT, MFTA on 2020-12-15 06:09:46.0

In recent weeks we wrote first that the gold mining stocks were approaching a bottom and later, that they had hit bottom.

Bottoms typically occur in an instant. They are rarely a process like tops. 

However, bottoms can take the form of patterns such as double bottoms and inverse head and shoulder bottoms.

The rebound in gold stocks began November 24, but after five days of selling, there is potential for a bullish bottoming pattern. 

GDX closed Monday at $34.29. It hit a low of $33.25 on November 24. There is very strong support around $33.00. 

The 38% retracement from the 2016 low is at $33.00. The 400-day exponential moving average (red), which supported corrective lows in 2001, 2002, 2003, 2006, 2009, and 2010 is at $32.44. 

GDX Daily Bars w/ 400-day eMA

The prognosis for GDXJ is similar. 

It closed Monday at $49.84. It hit a low of $47.68 on November 24. It has a confluence of strong support around $48.

The 38% retracement from the 2016 low is $47.00 and from the Covid low it is $48.36. 

The 200-day moving average is at $49.23, while former 7-year resistance (now support) in daily terms is $48.63.  

GDXJ Daily Bars w/ 200-day MA

History shows us that there are some instances in which Gold grinds out a bottom.

We compared the performance of Gold following interim peaks that we deemed similar to the August 2020 peak. That includes the peaks in 2003, 2004, 2006 and early 2009. 

The analogs argue Gold could grind out a bottom over the coming weeks and work its way higher in the first half of 2021. 

Gold Correction Analog

The takeaway is just because more time could be needed to setup a sustained rebound, does not mean we should abandon our constructive views on the sector.

The weight of the evidence (technical, fundamental, sentiment) argues that Gold and gold stocks are nearly done with their correction in price.

My guess is that GDX and GDXJ will form a double bottom over the days ahead.

It's much easier to chase momentum and buy when everyone is doing it. It's more difficult to buy at the end of a correction even during a bull market. But that's where we are. 

This is an opportunity to buy quality at a much better price and value than several months ago.

In our premium service, we continue to focus on identifying and accumulating those quality companies with significant upside potential over the next 12 to 24 months. To learn the stocks we own and intend to buy that have 3x to 5x potential, consider learning more about our premium service.

The post Gold & Gold Stocks Grinding Out a Bottom appeared first on The Daily Gold.

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