The MSM headlines say that gold, silver and the miners are selling off due to inflation fears, which in turn are due to oil prices, which in turn are due to war. Okay MSM, whatever. High oil prices would affect coming quarterly performance, as we’ve already noted. It’s as simple as that. The rest is emotion and volatility.
Before beginning, I want to remind you that the view of the gold stock sector is now “not unique” in the current macro. Not yet. After this correction shakes out I expect the bull trades to include a much wider segment of the commodity/resources sectors. Gold/Silver stocks will, IMO, have their place. But we should not obsess on them the way certain gold bugs will.
The technical situation is unfolding as anticipated back in January. That was interrupted by a bull trap shot to new highs in GDX, HUI and many individual miners and Royalties. When that failed and turned out to be a double top, we knew we were back on track.
The sector needed a heavy correction and it is here. I have dealt with it by doing some profit taking and hedging (short the miners, gold and silver, along with NEM just for kicks). You may have dealt with it by selling, shorting or heck, just understanding that it’s a correction within a larger bull market.
Personally, I want to book the profits from the short side, rather than keep the shorts as a hedge long enough for the profits to evaporate. But before that, I may use a strategy of using the shorts as a way to have strength in adding positions (reference last weekend’s NFTRH 906, w/ buy levels in miners and Royalties). I am still considering my options here, but with the correction on plan, I’ll want to focus on methods promptly.
GDX is due to open at the preferred downside target (50% Fib retrace, right grid and associated visual support) around 82 (red arrow).
However, also be aware that the rising 200 day average is below at 75 and that coincides with the 50% retrace level on the left Fib grid.
Speaking personally, it appears time to try picking off a preferred name or two, like AGI for example.
Now let’s correlate this to the big picture monthly chart of HUI, which we have used in one form or another since the 2016 low. A daily chart would show HUI’s 200 day moving average at 623, below visual support around 675. So it’s much like GDX above.
That is close enough to the big breakout support level of 600-610.
So with regard to the daily charts, let’s not be surprised by a quick strike below the 200 day moving averages. This is the gold stock sector, after all. And…
In that respect, HUI is like silver, which is dive bombing. It is currently at 69.60 in pre-market, but has downside to the mid-50s, potentially.
So the bottom line is that the correction is here. Those looking to buy and/or cover shorts should be at their stations. But keep a thought that the sector often corrects just a bit harder than you think it will. Even if you’ve projected a deep, hard correction.
