UPDATE: After reading this post, see my most recent update on the GDXJ rebound trend.
The Junior Gold Miners (GDX) ETF has rebounded as high as 59% ($52.46 on Aug. 26th) off its June 26th low of $33.04. It has currently settled back down to about 46% above the low ($48.19). So what’s going to happen next? Will it go up or down?
Well if you ask the technical traders, they’ll show you a chart below, which could be interpreted to indicate that we are still in a down trend.
However, pay attention to the green lines in the chart above. There have been 3 major rebounds since the beginning of the decline in December of 2010. Notice how the rebounds are getting bigger in size. The first rebound was about 28%. The second rebound was about 43%. And, as stated earlier, the most recent rebound maxed out around 59%. So on the technical side, this sector is more violently coming back with each rebound.
A major technical point was hit as well on the latest rebound as it crossed a previous peak and resistance level, as shown in the following chart:
Notice how the last peak when traced back (the red line furthest to the right) is higher than a previous peak and resistance zone. This could mark a turn around of creating higher highs and higher lows, which would indicate that the sector / ETF is headed higher.
For the technical traders, the next couple of months will have big meaning towards how they will invest their capital. If the price goes higher in the next few months, they will be looking for it to keep going to the next resistance zone of in the area of $65.
However, as it has pulled off its recent peak, and is declining again, it could start heading towards the all time low, in which case they’ll start shorting the stock again, helping to potentially push it past the lowest low. This will keep the the trend of lower lows going and the stock will be thought to continue to decline.
For me, all this stuff is great to look at and think about what others are potentially doing, but I’m a long term investor. These things really don’t matter much.
What I do know and count on is the fact that, relative to the long term scale, the Junior Miners are definitely not overvalued. And at this point, I believe the miners to be significantly undervalued as I wrote about in this article.
I have been investing with my proprietary technique continuing my purchases as it continues down building a stronger base with each incremental investment.
I’m at the point in my method where I won’t be investing any further, unless the index hits new lows. At this point, I have built up a strong base and would be happy if it went in either direction.
If it goes up, I’ll start watching my investment hit positive gains; and if it goes down, I’ll have the chance to add more, further building a stronger base.
If you haven’t started investing in the Junior Gold Miners, now, even after its significant rebound, is a great time to get involved, as in the grand scheme, it is still significantly undervalued.
Now, I’m not saying you should put a significant amount of money in at this point, but instead should start cautiously acquiring and continuing to buy as it goes lower, if it does. If it doesn’t.. well then you got something in and can enjoy the bumpy ride up. Just don’t start chasing the gains. All of this will be spelled out when I release my proprietary technique of investing for the long term.
The great thing about my technique is that it doesn’t matter where you start to get involved. My technique is tailored to your investment and the timing where you got involved in a particular investment.
I read a lot of other blogs and websites by investment guru’s that have portfolios that they want you to follow, but if you haven’t been with them since the beginning, you don’t get the results they get. …I’ll write more about this in another article, if I have the time; especially if some comments that you want me to explain it further.
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UPDATE: See my most recent update on the GDXJ rebound trend.