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We are approaching a “back the truck up” opportunity to buy into the gold sector.
These chances only come along once or twice each year.
Traders who are ready for them stand to make huge gains.
We got two such opportunities in 2021. We had one chance last year.
And, we’re about to get our first “back up the truck” moment for gold stocks in 2023 when the Bullish Percent Index for the Gold Sector (BPGDM) generates a buy signal.
The BPGDM measures the percentage of gold stocks that are trading in a bullish technical formation.
It’s a gauge of overbought and oversold conditions. Since it’s measured as a percentage, a bullish percent index can only reach as high as 100% or fall as low as zero.
Typically, a sector is extremely overbought when its bullish percent index rallies above 80. It’s extremely oversold when it drops below 30. Trading signals are generated when the index reaches extreme levels and then reverses.
Take a look at this two-year chart of BPGDM…
The first three blue arrows point to the BPGDM buy signals over the past two years.
The gold sector rallied about 20% in six weeks following the first buy signal in 2021. It gained 30% in three months after the second buy signal.
And, following the BPGDM buy signal last October, the gold sector again gained 30% in about three months (we had a couple of false buy signals in July and September before we got one that stuck in October).
Currently, the BPGDM is in extremely oversold territory. It will generate a buy signal when it turns higher from this condition.
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Of course, we don’t need a BPGDM buy signal in order to profit in the gold sector.
Traders could have made several profitable trades in gold stocks this year without the benefit of a buy signal. But, adding exposure to the gold sector when BPGDM says to buy is like running with the wind at your back.
We don’t have that buy signal yet. But, the chart is setting up for it.
And, when it happens, gold stocks should perform quite well for several weeks.
Best regards and good trading,
Jeff Clark
READER MAILBAG
Are you ready to back the truck up and buy gold?
Let us know your thoughts – and any questions you have – at [email protected].