Medium term
Trade view / 31 August 2016 at 7:31 GMT

A chance for GDX to fight back?


The price in the miners complex has more or less experienced a mini-crash since around August 11. Since the peak about the $32 level, the gold miner ETF (GDX:arcx) has now reached the important $26 pivot, a 20% discount!

Looking at the price structure of the GDX, we have accounted for a first wave into the peak set in mid-March. From there we can count two more swings which, of course, at first glance appears a complete move. 

However, using Elliott Wave analysis we don't accept the third wave to be the shortest which is why there is reason to believe that we have only just completed the epicentre of wave three, which leaves two more waves unaccounted for.

There is still reason to be bullish.

Time cycles support the above. At the peak in August we have an intermediate cycles topping out but nothing that puts too much confidence in the case of a final and larger peak. The advance off the January lows had travelled some 204 days into the August high, from then on we have fallen for 19 days, a 360 degree alignment and a potential reversal cycle.

Price levels to watch are the current area of trading at $26 (this is important for the bulls to accomplish). From then on we are looking higher at $28, $31, if we can crack this level $34, and the ultimate and perfect peak of the cycle off the January lows at $37.

Turning back to time alignments the ideal ending of this bull cycle falls on either day 225, and if that day fails to produce a peak (which appears to be the case) the next alignment is located on day 360 of the advance. 

The first date would then be on September 4; the next cycle would then come in mid-January next year. 

Management and risk description

The plan is to go long the GDX:arcx for a move higher. We are bullish above $26 and especially if we can see price moving higher into next week. The targets are $28 and $31 to start with. 

For those who like to take longer term positions one can look for the loftier levels. It is however important we see a break above $31, which might take some time. The stop could initially be placed upon a daily close below $25.

The main risk of trading the GDX:arcx and related miners is the volatility which calls for sizing positions accordingly. We also have the nonfarm payrolls this week which might cause some volatility.


Entry: buy a daily close above $26.

Stop: daily close below $25.

Target: $28, $31, $34 and $37.

Time horizon: from two weeks into mid-January 2017, depending on target.

GDX:arcx daily chart:
GDX:arcx daily chart

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Source: Saxo Bank 

GDX:arcx daily development chart:
GDX:arcx daily development chart
Source: Saxo Bank  

— Edited by Michael McKenna

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Non-independent investment research disclaimer applies. Read more
31 August
Johan Berntorp Johan Berntorp
One would really have liked to see a bounce today, but today we have a Doji like close outside the BollingBands®, so still a shot to get back up and trigger the setup.
31 August
bancodemon bancodemon
I'm trading this based on your analysis...fingers crossed..
01 September
Johan Berntorp Johan Berntorp
Fingers crossed...We also had the SIL:arcx and RGLD at key levels yesterday. Perhaps it want to touch the $25 before reversal. The $26 trigger is a safety measure to try to avoid sitting in a downward spiral thus getting a low point as a reference. It is important we gain traction very soon I think, however sometimes cycles are late. For example I had a calculations for a possible low point in Oil on July 29 but the low didn't stick until August 2...
06 September
Johan Berntorp Johan Berntorp
First target has been hit and taken out...
07 September
Johan Berntorp Johan Berntorp
Nice back test of the $28 level today!
11 September
Johan Berntorp Johan Berntorp
That back-test turned sour fast. Now the swing higher looks like only one swing higher so far and even if the tape is bearish we should expect another attempt higher. In either case the lows just above $25 should now hold or else this market is going lower still but until that happens we are good...


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