Jeff Clark's Market Minute

Is the Gold Stock Rally Over?

Gold stocks are facing their biggest test since the intermediate-term rally began last November.

The VanEck Vectors Gold Miners Fund (GDX) is up about 16% since we pointed out the start of an intermediate-term rally in the sector last October. But, the gold stocks have been trading poorly over the past couple of weeks. And, after last week’s 6% drop in GDX, readers have been asking, “Is the gold stock rally over?”

In order to answer that question, let’s take a look at the chart…

In early October, GDX rallied above its 50-day moving average (MA) (the blue line on the chart). Even more important, the 9-day exponential moving average (EMA) (the red line) crossed above the 50-day MA as well. This “bullish crossover” often marks the start of an intermediate-term rally phase.

Traders can then use any weakness that causes the 9-day EMA to come back down towards the 50-day MA as a chance to add exposure to the sector.

If the 9-day EMA bounces off of the 50-day MA, then the stock is headed even higher. On the other hand, if the 9-day EMA drops below the 50-day MA, then it creates a “bearish crossover.” In that case, traders can then exit their positions for a small loss.

We only got one really good chance to buy into the gold stock rally. That was in late November – right before gold stocks blasted higher.

We may be getting close to another chance to buy into the gold stocks.

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Following last week’s decline, GDX is now testing the support of its 50-day MA. If it can just hang out at this level for another couple of days, then the 9-day EMA will drift lower and test the support of the 50-day MA as well.

And, just like the buying opportunity in late November, traders will have a lower-risk chance to buy into the gold sector. If the 9-day EMA bounces off support, then the gold sector will be poised for another rally attempt. 

If the 9-day EMA falls through support – thereby creating a “bearish crossover” – then traders can exit their positions for a small loss.

Best regards and good trading,

Jeff Clark

Reader Mailbag

In today’s mailbag, a new Delta Report subscriber comments on the service…

Jeff, I just joined a few weeks ago and love the service so far. Specific trades with an explanation of why you like them, using a lot of options and then the quick (brief), timely updates sent directly to my phone is exactly what I have been looking for in a service.

– Ruel

Another subscriber wants more gold…

Dear Jeff… You don’t call… You don’t write… I’m beginning to think you don’t love me anymore.

Signed, gold and miner investor.

– Cal

And one reader gives their take on market technicals…

We cannot seem to break the 9-day EMA. This market sucks, big time!

– Ryan

How have you been trading gold? Are you betting the rally will continue… or fade?

And as always, send any other trading questions, suggestions, or stories to [email protected].

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Jeff Clark's Market Minute Archives

Jeff’s intuitive feel for short term market swings and his strong protective discipline have allowed me to lock in thousands of dollars in gains where I might otherwise have just ridden the markets up and down .”  -Chris, a reader and “seasoned investment advisor” from Seattle

Jeff -- your picks and analysis have been nothing short of amazing. I have traded the market for many years but I must admit, I have NEVER seen something this good.” - Mike H.

In only 2 weeks of using the service I’ve booked over $10K in profits. Needless to say I’ve paid for my membership.” - Tony J.

I started following Delta Direct about 3 weeks ago… I bought a small investment from one afternoon to the next morning. About 11AM I got out and made 8K in less than 24 hours.” – D. Tilghman