In a previous article on the Rebounding Trends of GDXJ, I discussed how the bottom of each major decline of the stock/sector has been followed by a growing percentage increase in the subsequent rebound. In the second half of that same article I showed a chart which indicated that the precious metals mining sector (as represented by GDXJ) was still in a long term decline.
I wrote that article in the middle of March, and over the last 4 months, a new supporting trend is beginning to form which may indicate the sector is turning the corner into a long-term-gain trend.
The chart below indicates two major trend change indicators currently materializing.
First, I have shown how the pattern of lower highs and lower lows has been broken, both on the low and the high side. This is indicated by the declining red lines and arrows changing to the up-trending green lines and arrows. Notice that the June low was higher than the previous low around December, and the current high is just topping the previous highs from March. This situation hasn’t happened in over 3 years!
Second, in the bottom half of the graph, I’ve indicated the strong increase in volume, which if not caused by massive robo-trading (an article I need to write to explain), indicates a strong resurgence in popularity of the sector/stock (see “mob mentality” section of this previous article).
I don’t put a lot of weight in the technicals indicated above. Like a Rorschach test, you tend to see what you want to see when performing technical charting.
If I did believe strongly in the technicals, I would probably choose this point to start risking large sums of money, trying to catch the long term bottom as the indications of a turn around seem to really be adding up.
However, if the above analysis were not to be the full story of the end of the long term decline, should the sector drop back down to new lows, I would probably again get overly emotional and sell for a loss at wherever the actual bottom may end up being.
Don’t play these head games! Investing like this is just gambling!
I have developed my own proprietary method of investing that allows me to achieve significant long term gains by taking advantage of long term market sentiment and inefficiencies in a way that keeps me from making emotional mistakes while helping me stay with my profitable investment plan.
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