Metals and miners are moving higher and the first scenario in the Weekend Newsletter has taken center stage. Several members are wondering what to do. So, I put together a short-term strategy for those that feel like they can no longer wait. I choose not to buy breakouts (sometimes they’re tops), so I’ll wait for a well-defined correction.
Before we get into the strategy, I’d like to recap the last few months. Back in December gold was just $75.00 from the 2015 low. And the final push into an 8-year cycle low seemed achievable by February. Therefore, I felt it was best to watch the move out of December before taking positions. If the December low proved itself, we would buy the first correction in late January. Unfortunately, prices (especially miners) didn’t correct deep enough to give us a low-risk entry. High-level consolidations are nearly impossible to prognosticate. So here we are still waiting for a proper correction.
I still think we could see a top this week, but the large volume in GDXJ suggests a breakout. However, the volume in GDX was lackluster, and there was selling-into-strength. Surely mixed signals. Nevertheless, we could see profit taking in miners begin tomorrow. That could lead to a quick price dip. In that case, eager buyers may get another chance to buy near today’s lows.
Short-Term Strategy: Consider using the 9-day EMA as a guide to buying short-term trading positions. Closing below the 10-day EMA would be the stop-out level. Keep positions small.
We may not get a price dip, but if we do, I’ll update as prices approach their 9-day EMA’s. I’ll provide better stops as the rest of the week shapes up. The above strategy is for nimble and experienced traders that can’t wait for a genuine correction.
-GDXJ- Prices may come back to retest the breakout line (just under $40.00) later this week. Apprehensive buyers can buy the dip if that occurs. I would use a daily close below $39.00 as a stop. Closing back below the 200-day MA ($38.50) would likely suggest a more meaningful correction has begun; the pullback we’ve wanted.
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