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GDX May Go Sideways For 3-4 Days At 50% Fibonacci Retracement Level

|Includes:DUST, VanEck Vectors Gold Miners ETF (GDX), GLD, NUGT

(click to enlarge)Click to enlarge

This is a short instablog to make traders aware that we have nearly retraced 50% of the recent up move in the gold miner ETF (NYSEARCA:GDX) and may trade sideways for 3-4 days before resuming the downtrend. Just look at what occurred in the May/June timeframe in the above chart. We had just over a $4 range from the low $26s to the low $30s as part of a 2 1/2 week rally. We rolled over on June 7, 2013 marked as day "1" above. On the second day we did a harami pattern, then gapped down hard on day "3". That third day was June 11, 2013 and it looks so much like today's action, it has to be the doppelganger to today's Oct. 31, 2013 candlestick. In June, GDX went sideways for four days and then rolled over for seven hard down days. A similar thing could happen now. Just look at the recent pattern and we find we had a 2 1/2 week rally from $23 to $27, a similar $4 range. On Tuesday, May 29, 2013, we rolled over similar to day "1" back in June. Day "2", May 30, 2013, was a harami cross that failed to confirm any bullishness, just like in June. Now today being day "3", we gapped down hard and are trading near the $25 level, which would again be a 50% correction of the recent $4 rally. Therefore I suspect that we might go sideways for 3-4 days if $25 or a bit lower can hold support, before rolling over again. During this time frame, traders might be able to buy DUST at a discount during the up days in GDX. I would not favor buying NUGT but one might slip in some long scalps in GDX if the right conditions present themselves. After about a 4 day reprieve, then expect a resumption of the downtrend in earnest.

Just for fun I also marked the August/September timeframe on the chart where we got a 2 week rally from $24 to $31 in GDX. Again, after reaching the 50% retracement level, we went sideways for about 5 days before slipping further down. Just something to watch out for.