When the Stars Align in the Gold Miners

Bill O’Neil taught me that around 50% of breakouts pullback to test/probe the breakout point.

We anticipated a Rule of 4 Breakout in GDXJ last week.

This is a breakout over a 3 point trendline.

You don’t typically see quadruple tops or bottoms, so the 4th time through is usually the real deal.

Not all breakouts are created equal. The Rule of 4 does a good job of identifying new uplegs.

A daily GDXJ below shows its Rule of 4 Breakout followed by a backtest of the breakout point yesterday.

As well, Thursday’s backtest was a Trifecta of Technicals:

1) A test of the rising 20 day moving average, a Holy Grail buy signal.

2) Two consecutive lower daily lows while the 3 Day Chart is pointing up. This put GDXJ in the Plus One/Minus Two buy position.

3) A 180 continuation buy signal: On Wednesday, GDXJ closed near session lows (within the context of an uptrend); on Thursday, GDXJ closed near session highs. A 180.

Underpinning the breakout and presumed follow through is the Expansion Pivot last week… the large range reversal off the test of the 50 day line.

Range precedes price and the large range reversal off the key 50 day moving average telegraphed what looks like an important breakout.

Hit & Run subscribers have probably had a dozen successful swing trades in GDXJ since the big June breakout one year ago.

The one year cycle suggests another advance may be on the table.

Yesterday’s pullback looks like a solid risk/reward buying opportunity.

Pos GDXJ

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