As suspected, the correction that barely touched the top of the 250-260 support zone last week was not a one and done affair. It was too quick and relatively pain free. That’s not usually how the gold sector rolls, even in a bull market. The “hits” that gold bugs complain about are actually speculative interests selling a relatively small and less liquid market in knee jerk fashion.
So here is HUI back at the 250-260 support area at which we’ve been expecting a solid and healthy test. So far that is 100% on target as Huey looks to test a little deeper into that zone and test the up trending SMA 50. GDX has a gap at around 30.90, which equates to HUI in the 230s. We have been noting that gap in GDX could fill. But if HUI goes to the 230s it could also test the SMA 200 (228 and rising).
But now there is another layer. A short-term H&S pattern has formed and while some may give ominously bearish views based on that, it targets to near the breakaway gap that I have felt would not need to fill. Well, it is the volatile gold sector and if that were to come about it would retrace about half the rally out of the March low and provide a good buying opportunity, assuming positive fundamentals and indicators at the time.
As it stands, HUI has not even lost initial support and the SMA 50. So I don’t want to go whole hog on the correction scenario until it does. I have my levels plotted to add on a couple core items (e.g. GBR.V @ 9.50 CAD & MAI.V @ .32 CAD) should they come about. I am watching the whole list and will plan to update buy areas, as applicable, this weekend.