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Gold Stocks, Both Junior and Senior, Poised for Rebound
Pinnacle Digest writes: Jordan Roy-Byrne, along with our team at Pinnacle Digest, called the correction in silver and gold stocks well in advance. However, as Roy-Byrne explains, the typical seasonal pullback in these equities, during October, has overstayed its welcome. The correction is now 19 trading days deep, but their are some “stealth signs of strength and signs of the correction nearing its end” according to Roy-Byrne.
Using the GDX (large cap gold miners) as an example, Byrne points to numerous positive elements taking place from a technical standpoint in its market. He states “First, is the price action. The market has very strong support at $48 to $49. It first bottomed at $50.90 and then at $50.81 on Monday. Since then, GDX pushed higher to $53. Secondly, note that the RSI bottomed at 50. In a bull trend the RSI will bottom at 40 and not the typical 30. However, in a very strong bull trend the RSI can bottom at 50. Third, the GDX vs. GLD ratio has shown strength in the past few days and has shown little to no weakness during this correction. Finally, note the accumulation line at the bottom of the chart. It barely dipped after surging for several months.”
The GDXJ, which holds the small to mid-cap gold mining and exploration stocks, also looks to be forming solid support at $23. It currently trades at $23.94. With support building at a marginally lower price, one has to believe the juniors are poised for a major move up. Byrne’s near-term target for the GDXJ is $30.
Silver stocks are looking strong as well, with heavy support levels not far from where they currently trade. Keep in mind silver stocks, and the metal itself, are far more volatile given the lack of liquidity in this sector.
Byrne is bullish that the overbought signals in September for precious metal stocks has long since faded. It was a natural occurrence to see such a consolidation after the nice run-up in these equities toward the end of summer. While consolidation in precious metal equities could last a couple more weeks according to Byrne, he believes a major up-leg heading into Christmas is likely.
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