Gold’s Recent Rally Will Face Its Next Major Test

Larry’s Note: Tomorrow, I’m going to share why March 17 should be circled on every trader’s calendar…

It’s when the next shockwave is set to hit… and traders who are prepared ahead of time can use the volatility to profit. In similar setups in the past, you would’ve been able to double your money or more during this short window of opportunity.

At 8 p.m. ET tomorrow night, I’ll show you how… including my favorite ticker to use.

So if you haven’t yet signed up to attend, you can go right here to RSVP instantly. See you then!

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Last year, the VanEck Gold Miners ETF (GDX) was stuck in a downtrend from April to October.

But then GDX rallied strongly, rising 55% from its September low to its January 2023 peak.

After hitting that peak, though, GDX soon reversed…

When we last looked at GDX on February 23, it was in the thick of a down move. It fell around 20%.

However, that heavy sell-off had GDX closing in on oversold territory… And that set it up for a potential bounce.

So with GDX rallying, today we’ll see what’s coming next…

Repeatable Patterns

The chart of GDX below shows its huge downtrend that began in April (‘A’) last year…

That peak at ‘A’ coincided with the Relative Strength Index (RSI) forming an inverse ‘V’ and reversing from near overbought territory.

Then, the 10-day moving average (MA – red line) bearishly broke below the 50-day MA (blue line) and confirmed the down move. Take a look…

VanEck Gold Miners ETF (GDX)

Source: eSignal

Notice the action of the RSI… Throughout GDX’s down move, the RSI remained in the lower half of its range.

Then, when GDX rallied in October, the RSI broke up through resistance (green line) and gained traction in the upper half of its band.

That up move from the September low was confirmed by the 10-day MA breaking back above the 50-day MA.

However, another common RSI pattern warned GDX’s rally could soon end…

As GDX was making higher highs (upper orange line), the RSI was making lower highs (lower orange line). When buying momentum tracks lower like this, it will eventually pull the stock price down.

And that’s exactly what we saw as GDX topped out at ‘B.’ Take another look at the chart…

VanEck Gold Miners ETF (GDX)

Source: eSignal

The next down move gathered pace when the RSI broke down through support and tracked into the lower half of its range.

But on February 23 (red arrow), I was checking if another recurring pattern would repeat…

When the RSI previously formed a ‘V’ and rallied from oversold territory (red circles), GDX subsequently bounced.

I was looking to see if this would happen a fourth time… And as you can see, that’s how the recent move played out.

But now the RSI is quickly approaching resistance. So, what can we expect from here?

Gaining a Foothold

Well, the previous red circles on the chart provide a strong clue…

When the RSI rallied up to resistance but couldn’t break through (the two left circles), the RSI rebounded lower, dragging GDX down.

After that, the RSI initially broke through resistance (third red circle) but was unable to gain traction. So once again, we saw GDX retrace.

GDX resumed its rally only when the RSI finally gained a foothold in its upper range – and stayed there.

If a similar pattern repeats this time, then GDX could potentially be set for another leg higher.

The next test for that rally would then be for GDX to make a higher high than ‘B.’

Regards,

Larry Benedict
Editor, Trading With Larry Benedict

Reader Mailbag

Do you believe GDX’s rally will continue higher, or will it retrace?

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