Wednesday, February 04, 2015

Gold and Miners Readying To Breakout Into ECB QE

Gold has been trading inversely to the US stock market for several weeks now, intra-day and daily. A weakening US dollar and anticipation of the ECB quantitative easing program starting, could prove bullish for gold over at least the next month or two. This would most likely coincide with a correction in the US stock market.

In, Gold Silver Ready To Follow Oil and Gas Collapse, I wrote that gold, silver, and related miners were ready to rollover. At the time, December 23, 2014, the commodity and related miners were consolidating in traditional short setups, but those fell up apart as quickly as I wrote the article. 

Instead of breaking down, they broke out over their respective fifty day moving averages and rallied nearer to their fifty two week highs over the last five to six weeks. 

The good news, the majority of the short setups would not have trapped traders into a trade, as the majority did not attempt to breakdown. Those that did attempt to breakdown, would have had tight stops and traders would have lost very little.

Currently, gold and related miners have been consolidating in cup and handle bases. Ideally, they will sell off/shake out, four to five percent more, over the next week or two, and setup a lower risk, higher probability trade. 

Since the market doesn't typically do what I like, the current entry would be a breakout above handle highs. Gold (GLD), Hecla Mining (HL), Rangold Resources (GOLD), Royal Gold (RGLD), Barrick Gold (ABX), and Newmont Minding (NEM), are forming cup and handle bases, with solid accumulation patterns and shook out under cut multi-year lows last year and early this year. Without the shakeout in the handle, the trade might be difficult to handle.

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