Jeff Clark's Market Minute

Here’s When to Buy Gold Stocks

The golden bounce has run its course. Gold stocks are headed lower again. And once this decline is over, traders will have an outstanding chance to buy into the gold sector.

Two weeks ago, the gold sector was oversold. We figured it was setting up for a bounce. But, we also suggested that any bounce would be short-term only. The gold sector still had more work to do on the downside.

That work has started again. 

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Here’s an updated look at the chart of the VanEck Vectors Gold Miners Fund (GDX)…

GDX rallied more than 10% right after we called for a golden bounce. Then the stock ran smack into resistance at $29.50 and turned lower. The decline over the past two days has pressed GDX down into the support of its various moving averages – which are all coiled around $28.45. 

Traders should remember that gold stock corrections tend to unfold in three distinct moves. There’s the first, sharp move lower, followed by an oversold bounce, which is then followed by another sharp decline to a lower low.

GDX is now in the third leg of its decline phase. We should expect the stock to make a lower low – below the $26.50 level it hit two weeks ago.

The most obvious support below $26.50 is the early-July low at about $24.50. That’s my target for this move. And, that’s where traders should start looking to add exposure to the gold sector.

The longer-term outlook for gold and gold stocks is as bullish now as it has ever been. But, it looks like the sector is going to suffer some short-term weakness.

Traders who are looking to buy into the gold sector should have an excellent opportunity to do so sometime within the next few weeks.

Best regards and good trading,

Jeff Clark

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