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Friday, September 14, 2012


What a nice run these guys have had.  Lets look at GLD first starting with the monthly chart.

The new red line is at the Nov. peak.  The yellow line is in the area of the two highest monthly closes since the top last year.  This is the zone that has been resistance ever since GLD topped out.  The monthly volume on this rally is considerably lighter then up months back in 2010 and 2011.  Lets zoom in to the daily chart.

I think it is pretty obvious this is very over bought, LOL.  It looks like a mile away from its 50 SMA.  Clearly a pause seems likely.  The question is will there be any significant profit taking or more of a sideways move. What sized QE package is priced in?  It seems prudent for short term traders to take partial profits at least. We will just have to wait and see what develops from here.

Here is the weekly chart of GDX.

I circled the massive topping formation.  The blue line is today's close which you can see is up into the bottom of the overhead resistance area.  A normal stock chart like this would have pretty high odds of having a considerable downside reaction once it stops.  As I have stated before I do not understand what caused the crash to happen in the first place.  Are there still issues out there for the miners?  If you look at the volume pattern you can see the volume has not been all that high on this move up.  The big red bars are still dominant.  Lets zoom in to the daily chart.

Like GLD we are a long ways from the 50 SMA.  Today was the highest volume of the entire rally.   That opens up the possibility of a short term volume climax.  Because of the much larger overhead resistance it would seem that GDX might be more prone to some real profit taking then GLD is.  Short term traders should think about booking some profits.  A pause at least seems highly likely.

Both of these ETFs are very extended and the news is out.  They might be likely to come in contact with the 18 SMA before going much higher.  That could be through a pullback or going sideways to let the MA catch up.  Those MAs are considerably lower then the current price so a normal pullback could still be significant.  Will there be a sell the news reaction or will people be content to hold on?  I guess we will find out as the price pattern develops.


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