The set-up: The junior miners — the small exploration and production companies — have been leading the seniors, with VanEck Vectors Junior Gold Miners ETF (GDXJ) outperforming the VanEck Vectors Gold Miners ETF (GDX). That has me feeling bullish, looking for a continued long-term uptrend in precious metals.
How I’m playing it: Starting Aug. 21, I’ve taken a position in 11 gold mining stocks and ETFs: Newmont Mining Corp. (NEM) on the Nasdaq and 10 others on the Toronto exchange (all listed in the disclosure below). Coming off the long weekend, I’m very much in the green on them, but I’m expecting a pullback and I am looking for a buy signal to add more shares to what I already own.
What the charts say: Long-term trends do not come without pullbacks, but there’s a nice uptrend here, with both GDXJ and GDX over their 50- and 200-day moving averages on the daily and weekly charts. The GDX is coming up into resistance from February 2017 and the GDXJ is coming up to resistance from April 2017. The other thing I like is that, on a monthly graph, the GDX and GDXJ both broke out on good volume in August after sitting on their 50-period moving averages for a few months (six for GDX, two for GDXJ). That kind of strength confirms this as a long-term play.
Why: With all the geopolitical tension around North Korea, the miners certainly haven’t acted the way I expected. The usual response to world news is bigger, quicker moves, and plays that are a lot more aggressive; I think a lot of people were playing with bitcoin and now — with China clamping down on bitcoin and other crypto-currencies – the action may be moving into precious metals.
The outlook: I’m very green at the moment, so while I continue to stay bullish, I’m certainly not suggesting that anyone jump aggressively into precious metals here. Watch the technicals and look for buy signals in these the gold miners on pullbacks.
Petra Hess runs PetraPicks.com. She is a technical swing trader and long-term investor in domestic and Canadian stocks and ETFs. At the time this article was published on RagingBull.com, she had taken positions in the following miners/gold ETFs: Newmont Mining Corp. (NEM, 280 shares at $36.71, purchased Aug. 21), Franco-Nevada Corp. (FNV.TO, 200 shares at $99.60 on Aug. 24), Agnico Eagle Mines Ltd. (AEM.TO, 300 shares at $62.06 on Aug. 31; Pan American Silver Corp. (PAAS.TO, 600 shares at $23.08 on Aug. 31); iShares S&P/TSX Global Gold Index ETF (XGD.TO, 1,200 shares at $12.43 on Aug. 21); Wheaton Precious Metals Corp. (WPM.TO, 300 shares at $24.63 on Aug. 21), BMO Junior Gold Index ETF (ZJG.TO, 3,000 shares at $8.86 on 8/21), Barrick Gold Corp. (ABX.TO, 250 shares at $22.61 on Sept. 5), McEwen Mining Inc. (MUX.TO, 2,000 shares at $3.31 on Sept. 5); Osisko Gold Royalties Ltd. (OR.TO, 800 shares at $17.20 on Aug. 28); and Yamana Gold Inc. (YRI.TO, 1,500 shares at $3.81 on 9/5). All names except NEM were traded on the Toronto exchange; Petra’s purchase price is listed in Canadian dollars.
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