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Buy This Gold Stock Pullback

By Jeff Clark
Thursday, September 5, 2013

The current pullback in the mining sector may be the last chance to jump into gold stocks before they explode higher through the end of the year.
 
Back in June, gold stocks were set up for a violent rally. Since then, the Market Vectors Gold Miners Fund (GDX) has bounced from a low of about $22 per share to a high of just above $31 per share last week. That's a 40% rally in two months – which qualifies as "violent."
 
Over the past few days, though, gold stocks have pulled back. And a lot of folks are wondering if that's all there is for the gold-stock rally.
 
It's not.
 
The rally off the June lows was enough to push the gold sector above its 50-day moving average (DMA). That action signaled the end of the intermediate-term downtrend that started last November and kicked off a new uptrend for the gold sector.
 
Pullbacks in uptrends are buying opportunities. So the action over the past week gives traders a chance to buy gold stocks.
 
Take a look at this chart of GDX...
 
 
There are three logical areas of support just below yesterday's closing price. The first support line (S1) is at about $27.40. Traders can start nibbling on gold stocks at that level.
 
A more likely downside target is the 50-DMA line at $26.50. During the early stages of a new uptrend, it's common for a stock to come back down and test the 50-DMA from above. That's the spot to get more aggressive with purchases.
 
Finally, there's additional support just above $25 – on the line that connects the series of higher lows (S2). That should be about as low as this current pullback goes. Any decline below that level would threaten the validity of the new uptrend and likely lead to a retest of the June lows.
 
But given how oversold the gold sector was in June and how violent the bounce has been off the bottom, this new uptrend has a lot farther to run.
 
Traders should buy any pullbacks toward support.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

"All eyes are on gold stocks right now – and they should be," Jeff writes. "But it's not just the stocks of companies mining the shiny yellow metal that are on a tear." Jeff says there's another sector rallying right now... and everyone is missing it. Get the details here.
 
"Hundreds of thousands of traders have blown up their trading accounts by trading against uptrends and by trading against downtrends," Brian Hunt writes. "Trends can last a long time... and you must either trade with the trend, or step aside." Learn more in this Common Sense Guide to Technical Analysis.

In The Daily Crux
Market Notes
Oil and gas producers ConocoPhillips and Pioneer Resources hit new highs.
 
Australian stocks are trying to start a new uptrend... country fund EWA jumps to a three-month high.
 
Gold miner fund GDX is still down 40% since January.
 
Gaming stocks continue their big run... casino and gambling fund BJK surges to a new all-time high.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1653.08 +0.8% +17.7%
Oil (USO) 38.34 -1.1% +8.0%
Gold (GLD) 134.66 -1.3% -18.1%
Silver (SLV) 22.69 -3.0% -27.7%
U.S. Dollar 82.16 -0.2% +1.0%
Euro 1.32 +0.2% +5.1%
Volatility (^VIX) 15.88 +18.6% -11.7%
Gold Stocks (^HUI) 257.91 +0.8% -43.5%
10-Year Yield 2.90 +1.8% +83.5%

World ETFs
Symbol Price
Change
52-Wk
Japan (EWJ) 11.31 +1.5% +28.4%
Israel (ISL) 14.65 -0.1% +27.9%
USA (SPY) 165.75 +0.8% +20.2%
China (FXI) 36.85 +1.7% +16.8%
Taiwan (EWT) 13.87 +1.4% +12.0%
S. Korea (EWY) 59.14 +2.4% +6.4%
Canada (EWC) 27.72 +0.5% +2.0%
Singapore (EWS) 12.48 +0.4% -1.3%
Russia (TRF) 13.93 +0.6% -2.1%
S. Africa (EZA) 59.31 +1.6% -5.9%
India (IFN) 17.55 +2.9% -7.7%
Lat.America (ILF) 35.41 +0.3% -11.4%

Sector ETFs
Symbol Price
Change
52-Wk
Biotech (PBE) 34.24 +2.7% +45.5%
Alt. Energy (PBW) 5.72 +2.1% +41.3%
Media (PBS) 22.18 +0.8% +40.2%
Defense (PPA) 26.80 +0.8% +39.5%
Health Care (IYH) 105.78 +1.2% +31.1%
Construction (PKB) 19.22 +0.5% +30.8%
Financials (IYF) 72.30 +0.7% +28.7%
Transportation (IYT) 113.59 +1.3% +28.6%
Industrials (IYJ) 87.23 +0.9% +28.1%
Consumer Svcs (IYC) 105.88 +0.8% +27.3%
Retail (PMR) 31.37 +0.5% +26.2%
Water (PHO) 22.57 +1.2% +19.8%
Insurance (PIC) 19.01 +0.1% +18.3%
Software (PSJ) 32.22 +0.9% +16.7%
Semis (PSI) 16.73 +3.1% +16.0%
Telecom (IYZ) 27.06 +0.8% +14.9%
Big Tech (QQQQ) 76.72 +1.1% +14.3%
Basic Mat (IYM) 71.89 +0.8% +13.4%
Nanotech (PXN) 6.75 +1.8% +11.6%
Utilities (XLU) 36.87 +0.0% +5.2%
Real Estate (IYR) 62.16 +0.7% -2.1%

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