Originally published on February 23, 2020 by TraderStef at CrushTheStreet.
I published an analysis with some mining stocks to consider in “Gold and Silver Mining Stocks Poker for a Late Fall Rally” Part 1 & 2, which are a follow-up from a list I started in Jun. 2019. I will make a few adjustments to that list today, then move on to a technical analysis of the GDX and GDXJ ETFs. While adjusting your personal watch list, be sure to review my most recent technical analysis on gold in “Gold at Overhead Resistance and the Global Economy is Precarious,” published on Feb. 13, along with updates on a Twitter thread.
“After scanning all the mining stocks… I selected a few miners to consider from a technical analysis point of view. Many look promising due to the rally in gold… but few adhere to my selection preferences. The primary filter is high volume with a minimum of 1 million shares traded on an intraday basis and no dead minutes to ensure tradable liquidity for scalps or swings, and then chart patterns and studies that indicate the potential for a near-term rise in price. The last issue you want regardless of your investment time horizon is to be sitting on a large block of shares with no liquidity and a bid/ask flow and volume giving you the middle finger when trying to close out (or add) positions.” – TraderStef, Jun. 7, 2019
The performance of the following miners is based on the first “close” date a price populates in a column vs. the most recent high. Carryovers are retained due to near-term positive technicals. A few overboughts or underperformers were benched at some point during 1Q20 (BVN, CDE, EXK, HL, SBGL). Here are links to the $GDX VanEck Vectors Gold Miners ETF and $GDXJ Junior Miners prospectus if you want to investigate the weighting of their baskets.
What’s on the horizon for investment in mining exploration in 2020?… “There is good news on the horizon for junior miners seeking investment in 2020, despite majors having underinvested in exploration for years, there are signs that this is changing.” – Resource World, Jan. 2020
Top 50 biggest mining companies.. “MINING.COM’s ranking of the world’s 50 largest mining companies based on market value shows a revived industry entering the 2020s, but with diverging fortunes for certain subsectors.” – Mining.com, Jan. 3
With Gold Surging, Miners Face Payouts Versus Production Dilemma… “As gold prices rise, miners have been boosting shareholder payouts in the face of a decline in global output. That is worrying some investors concerned about the long-term growth prospects of an industry built on a depleting resource… increasingly, investors are split between their wish for higher dividends in the short run and the need to assure company stability over the long term… Gold prices are currently at a seven-year high as concerns mount that the coronavirus outbreak in Asia will derail global growth… Earlier this month, though, Mark Bristow, Barrick’s chief executive officer, sent a warning shot across the bow of the industry. Even if all current projects work out, he said, gold supply will still fall 30% by 2029 (Peak Gold). While sinking supply would be bullish for bullion prices, margins and revenues could be hit if companies are forced to mine lower-grade or hard-to-access deposits… n January, Newmont said it planned to hike its dividend by 79% to $1 per share annually, effective in April, while maintaining production for the next five years… Generally, it appears the high-dividend strategy is helping lift gold equities.” – Bloomberg, Feb. 23
To view a larger version of any chart, right-click on it and choose your “view image” option.
GDX weekly chart as of Feb. 21, 2020 close…
Excerpt from the Nov. 1 daily and weekly chart analysis:
“When spot gold catapulted through $1,350 and the $1,380 Fibonacci level resistance of six years was obliterated in June, the gold and silver mining sector happily followed… That spike in price became the base for an Up Channel that peaked at $30.96 on Sep. 4, which is the same day that gold printed a high of $1,557 and silver at $19.64. As gold took an expected breather to consolidate, the GDX broke down from its high into a Falling Wedge. Just as gold and silver are basing out and in the process of exiting their Falling Wedge patterns, the GDX is pivoting out… Note that the Golden Cross on the weekly chart, a price pivot off the 21 Exponential Moving Average (EMA) without violating the 23.6% Fibonacci, and the price action on the daily cleared all of the moving averages. The DMI-ADX, StochRSI, CCI, Momentum, and Money Flow are all more positive on the daily vs. the weekly, but that dynamic is typical as the daily studies make their headway before the weekly follows. Near-term resistance levels for GDX are $28.18, $29.58, $30.96, $32 at the 500 Simple Moving Average (SMA) on the weekly, then $33.25 at the 38.2% Fibonacci. I remain bullish long-term but recommend waiting for gold to successfully reassert its rally before risking momo play capital on the GDX.”
Excerpt from the Dec. 27 weekly chart analysis:
While gold and silver rallied just before Christmas, the GDX followed with a decisive breakout from its own Falling Wedge and the price closed solidly above all the moving averages except for the 500 SMA… If momentum continues upward in gold as we move into the New Year, the bullish Alligator Tongue pattern setting up on the DMI-ADX will push further price gains in the GDX… The buying volume is strong and steady, but it has not reached the same level seen during 2016 when gold’s primary bull (accumulation phase vs. secular bull) liftoff ignited a rally in the mining sector. Take note of the Cup ‘n Handle pattern developing since the 2016 high, which will confirm when $31.79 is taken out… a breakaway from $33.25 is a key signal for institutional heavyweights to layer much larger long positions in the mining sector.
The GDX printed a high of $66.98 in 2011, a $12.40 low in 2016, a $31.79 high in 2016, a $30.96 high in 2019, and a $30.71 high last week. The 21 EMA has provided solid support since the price action pivoted out of the Falling Wedge in December, and the $31.79 and $30.96 laterals are the levels to keep a close eye on in the near-term. The potential for a breakout from the Cup ‘n Handle’s rim line is very high, as gold is experiencing a substantial upside move. Breaking through the 500 SMA on volume at roughly $31 is key to breaching the rim line. The DMI-ADX is threatening to go vertical with an Alligator Tongue setup, the CCI, Momentum, and Money Flow are turning upward, the StochRSI has crossed into positive territory, and the volume remains strong and steady but not spectacular. The overhead $33.25 Fibonacci may give the price action some stiff resistance, but that depends on how decisive the price move and buy volume develop while exiting through the rim line. The chart is bullish.
GDXJ weekly chart as of Feb. 21, 2020 close…
The GDXJ printed a high of $179.44 in 2010, a $16.87 low in 2016, a $52.50 high in 2016, a $43.10 high in 2019, and a $45.08 high last week. The GDXJ and GDX look very similar at first glance but there are significant differences. Most importantly, the Cup ‘n Handle rim line was taken out last week with a little help from an Inverse Head ‘n Shoulders tucked away within the handle. There is a larger gap without much resistance between the current price and the next Fibonacci level at $55.26 vs. the GDX having two Fibonacci levels to deal with, and the 500 SMA is not sitting on the Cup ‘n Handle’s rim line. The last two distinctions are the Golden Cross occurring later in the timeline and that the DMI-ADX has a more mature Alligator Tongue setup. The remaining studies are mirror images of GDX, and once again, the volume could use more on the buy side to move things along quicker. As long as gold continues its upside momentum, GDXJ will have an easier trip with less resistance at higher price points. The chart is bullish.
Here are two charts from the list of miners to consider that are top performers.
$GFI – Gold Fields weekly as of Feb. 21, 2020 close…
Gold Fields gained +49% since it was added to the list on Jun. 7, 2019. It printed a high of $18.70 in 2011, a $2.04 low in 2015, a $6.60 high in 2016, a $2.20 low in 2018, and a $7.55 high last week.
$AUY – Yamana Gold weekly as of Feb. 21, 2020 close…
Yamana Gold was added to the list on Feb. 21, 2020. It printed a high of $20.59 in 2012, a $1.38 low in 2016, a $1.78 low in 2019, and a $4.71 high last week.
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