Huey did what it needed to do as a first – and big – step in negating yet another potential bear flag, as it closed above 280. This morning (6:05 ET) the metals are firm again and assuming this remains the case it should prove not to have been another flag.
I had thought since last Wednesday’s hard down close and capitulation that there could be something different about any coming bounce attempt, although it did not begin to really show its cards until yesterday. The daily chart brings us up to date.
There is obviously a lot of resistance above and again, assuming the flag is being invalidated (you know what they say about assumptions) 300 is the next important level at the EMA 20, the lower downtrend channel line and a would-be gap fill. The deeply over sold RSI, now back above 30 implies the bounce can continue. It is likely that HUI is going to encounter some resistance at whatever price it is at when RSI gets to 50. This would probably be at around the 300 area.
With gold back above 1440 this morning, it is playing around with the first important level it needs to retake to start repairing some damage. The key level of course would be 1524. If gold gets above that level it would be a help to the miners’ bigger picture case. Short of that, gold remains technically compromised. Just like HUI was when it lost 375 (measured target: 100).
Speaking of which, back to the HUI chart. Note that there are 3 resistance levels that can be registered (a gap and the EMA 20 at 300, a gap and a small visual cluster at 320 and more notable visual resistance and the 50 day averages at 340) while HUI remains in ‘bounce’ mode only. None of these would end the bear market, but could be a hell of a trade.
The most important resistance is around 375, which corresponds with the neckline to the topping pattern visible by weekly and monthly charts and also breaks the channel trend. So you can see why the miners almost by definition, should be considered a trade right now. Again, I stress that this ‘trade’ could morph into something more like oh I don’t know, a new bull market? But there is no indication of that – short of the big capitulation last week – and there will not be until much later.
I am not telling people to be traders but rather, just laying out the road map. What you do with it is up to you. I still think investors will do well one day having bought something like AKG for well below its net cash value. But we will continue to work the technicals going forward for perspective and frame of reference.