Gold Looks Very Suspect

A few weeks ago I noted that a number of Gold Stocks were in narrow trading ranges and that I was interested in them if they broke out. I noted this, because the most efficient way to manage risk is to have defined levels, which are very close to your purchase price, where you can see supply taking over from demand.

The Gold Stock ETF (GDX) broke out on a long term chart to new weekly highs. It is now in pullback mode. It needs to hold the $54.25 level. Remember, some seriously large losses occur when stocks break out of trading ranges and then quickly reverse lower, through the old breakout point.



The largest holding in GDX is Barrick Gold (ABX), at 16.71%. You can clearly see how it broke out to new highs and then failed by falling back below $48. I got stopped out of ABX before Tuesday’s plunge. ABX now has a bearish wedge forming right below the 50-day (Black Line) – that is very ominous.



Newmont Mining is the 3rd largest holding in GDX, at 11.34%. You can see that it is right on critical support. It had better hold above $60!



Here are a couple “Junior” gold stocks. You can see how dangerous it is if you buy before they break above resistance. In parabolic moves, you still have to figure out how to manage risk!



Gold (GC Z0-D) broke support for the rally since August, so I now have to look at the June-July and December-February corrections to get support levels. I am now concerned that the correction in Gold will be more like what we saw in those multi-month corrections, so I expect this correction to at least take more time than it currently has.