Miners May Have Found A Bottom
- October 25, 2019
- / Jeff Cooper No Ads
- / By Jeff Cooper
For several weeks I have been saying that I expect the metals and miners to bottom by late October.
In addition to long positions in AG, SSRM and GOLD, we took a long swing in GDXJ on Wednesday.
This is probably the 5th or 6th long swing position the service has taken in GDXJ since May…I’ve lost count, but I do recall they were all profitable.
There are signs in a number of charts I track that point to the potential that the miners have bottomed.
For example, since GLD carved out bullish Train Tracks on October 1, it shows 3 higher lows.
Fast advances often play out from 3rd higher lows.
Notably the October 1 Train Tracks occurred from the heart of a runaway phase and an open gap in early August — a logical spot for a pullback to find support.
It must be said that GLD is perched just below its 50-day line following Thursday’s rally, so this pattern of a 3rd higher low, or what I call a Power Surge setup, supports the idea that GLD is poised to recapture its 50-day, currently at 141.90, on the important Friday weekly closing basis.
Additionally, Thursday’s 141.74 high at the 50-day moving average challenges a declining trendline from this year's September 4 high.
Interestingly, the September 4 high squares out with 141.
Yesterday, GLD closed at 141.53.
So, follow through above this 141 region underpins the idea that we may have a bottom in the precious metals.
GLD’s September 4 high for the year was 147.
It is fascinating that October 25/26 is 180 degrees straight across and opposite 147.
Everything points to an inflection point in this time frame.
At the same time, the upthrust to the September high started on August 1.
That was the largest range bar this year and, as such, it holds important time and price DNA.
November 1 is 90 days/degrees from the August 1 upthrust.
This is another reason why this time frame holds much potential.
The T-Rex in the ointment would be a spike to the 147 region into early November for a square-out that fizzles.
If we see such a move in the coming days that marks resistance, it need not be a failure; it may just augur in a pause/pullback where GLD respects the time/price harmonics at 147 in early November.
I don’t want to get ahead of the curve, we haven’t even cleared the 50 day m.a. yet; but, I wanted to map out how I go about defining objectives.
Because, you see, if I can determine where an item may be magnetized higher given a setup (such as we currently have in GLD), then I want to speculate on what the short-term potential may be.
This serves two purposes:
1) In the midst of acceleration it allows me to look at a momentum move with sobriety versus emotion.
2) It is important to have a time and price projection when it comes to options in order to lock in the cream.
Once I see an impulsive structure off the lows, then after a first pullback, we can align ourselves with the possibility for a major leg up in the miners.
Checking some names in the complex backstops the idea that a bottom may be in.
KL left a buy signal on Thursday from a Diamond formation.
AEM cleared its 50 day m.a. decisively.
AG presents as a continuation Cup & Handle.
Clearing the open gap from September 5 implies a new leg up is underway.
On Thursday we saw a conspicuous change in character in the growth glamours led by my 4 Horsemen, COUP, OKTA, MDB and TWLO.
On Wednesday these names spiked on the open and fizzled as is depicted by a daily COUP below.
As COUP broke out on October 10/11 we flagged a Megaphone Top formation warning of a waterfall decline to follow.
On the morning of October 15, we posted the following tweet on our Hit & Run private Twitter feed for members:
In fact, COUP dropped from 160 to 118 in 6 days. Its Breakaway Gaps on October 16th were a blaring alarm of indiscriminate selling to follow.
Breakaway Gaps show an impatience and an insensitivity to price.
After a nice spike on Wednesday morning, COUP faded to close at a new low for the move.
The last thing traders were expecting was a Gap & Go on Thursday.
Yet that’s exactly what we saw.
And that is probably exactly why Thursday’s gap after Wednesday’s failure stuck.
Whether Wednesday was the opening salvo of a rotation program back into growth and whether it is indicative of a sustained bottom in the growth glamours or just a big league squeeze is too early to say, but by the time it becomes clear, a big opportunity may have evaporated in the short term.
And it is the short term that foreshadows the intermediate term.
The point is that COUP carved out 3 drives to a possible low at the bottom rail of its Megaphone formation just above its 200-day moving average.
This was a logical setup for a turn to the topside this week.
I would not be surprised to see Pin Action to the 135 strike on Friday’s weekly opex.
If COUP clears and sustains above 135, then Pin Action to 140 could be on the table.
Interestingly, half the range of the waterfall decline ties to 139.
Pos AG, AG calls, GDXJ, GOLD, SSRM, CRWD
99.999% of traders have never even seen the Square of 9... let alone understand its potential.
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99.999% of traders have never even seen the Square of 9... let alone understand its potential.
Do you dare to be different?