The chart for the HUI Gold Bugs Index and the GDX/GDXJ ETFs have chopped sideways since December 2015, while gold has been in a mode of accumulating a solid base and putting in higher lows during the same time frame. Gold appears to be getting its giddy-up back on track as we approach the beginning of 2018. The ETF mining stock indexes have held up pretty well despite that gold has had a correction since September of 2017. The following charts are a summary of where they stand as of today’s close.
In addition, after going over a couple hundred mining stocks, I added a few choice individual charts that are leading the pack from a technical point of view. My primary filter is high volume to ensure tradable liquidity on a daily basis for scalps and swings, then all subsequent studies can be considered. To view a larger version of any chart in this article, right-click on it and choose “view image.”
“What it is: The Gold BUGS Index (also known as HUI) is one of two major gold indices that dominate the market. BUGS is an acronym for ‘Basket of Unhedged Gold Stocks.’ The index was introduced on March 15, 1996. How it works (Example): The Gold BUGS Index is made up exclusively of mining stocks that do not hedge their gold positions more than a year-and-a-half into the future. The Gold BUGS Index is comprised of 15 of the nation’s largest unhedged gold mining stocks. It is a modified equal-dollar weighted index. As a result, most of the index’s component stocks are equally weighted with the exception of a few of the largest stocks, which are more heavily weighted. Why it Matters: The Gold BUGS Index and the Philadelphia Gold and Silver Index (XAU) are the two most watched gold indices on the market. HUI is more volatile. When gold prices are on the rise, the Gold BUGS Index provides an excellent way for investors to capitalize on that increase. The index has a high correlation to the spot price (current price) of gold. When the price of gold declines, the Gold BUGS Index tends to fall much faster than its hedged cousin, the XAU.”
The HUI still appears weak, but it has continued to put in higher lows since December of 2015. The topside trendline drawn from the 2011 highs was never decisively taken out. The weekly candles have been straddling that trendline ever since gold began a correction in late September. The price remains below all Exponential Moving Averages (EMA), and the lower trendline of an Ascending Triangle was breached to the downside in October. However slight, the price still put in a higher low last week than the previous low from December 2016. The bright point on this chart is the StochRSI, as it has shown some strength over the last two weeks and is setting up an opportunity for price movement to the upside as we approach 2018. The price has some work to do to leave the EMAs behind, but during that process, the 2011 trendline could finally be taken out.
The GDX has maintained its Ascending Triangle pattern with a much higher low than in December 2016, ringing up a solid second tap and a pivot upwards in price over the last two weeks. It still appears weak, but it’s working back through the EMAs and will retest the 2011 trendline. As with the HUI, the bright side to this chart is the StochRSI, showing strength and setting up an opportunity for upward price movement as we approach 2018. A surge in volume would be helpful when the 2011 trendline is tested.
The GDXJ is nearly identical to the GDX. One significant difference is that the StochRSI strength is more mature, and another is that the 2011 trendline was taken out back in August 2017. The downside is that the Ascending Triangle broke down into a Wedge, although the challenges the price action faces are the same as with the GDX. It could also use a bump in the volume department, as the price will need to decisively take out the Wedge’s topside trendline.
Some rising charts to consider:
Fortuna Silver Mines – FSM weekly chart…
FSM has decisively taken out the topside trendline drawn back to August 2016, as well as all the overhead EMAs. The DMI-ADX has formed a classic Alligator Tongue set-up, which is very positive for momentum in the near-term. The StochRSI is also showing strength, having reached its upper bound range, but could continue for an extended period of time, as it has done so in the past. The volumes are looking good compared to 2015, and selling volumes look to have tapered off in capitulation while higher buying volumes are settling in.
Freeport-McMoRan – FCX weekly chart…
FCX has consistently put in higher lows since December 2015, and the topside trendline of an Ascending Triangle since December of 2016 has been breached for the last two weeks. The price is currently sitting just above the 200 EMA by fifty cents. There is not much resistance to the price on the upside. The DMI-ADX is positive, and the StochRSI is showing strength. As with the ETFs, this chart could use a nice bump in volume to assist in a decisive takeout of the 200 EMA so that the price can move along without hindrance. A near-term target is $22.
VALE weekly chart…
VALE has a very similar look to FCX. One significant difference is that volumes remained stable, even during its capitulation phase in the second half of 2015. It has had a steady overall price movement without substantial swings, and it has consistently put in higher lows since December of 2015. All of the EMAs have been left behind, and the 50/200 EMAs are about to make a bullish Golden Cross, as the price is challenging the Ascending Triangle’s topside trendline. That topside trendline is also the rimline of a bullish Cup and Handle. The DMI-ADX is positive, and the StochRSI is strong. A near-term target is $15.The DMI-ADX is positive, and the StochRSI is strong. A near-term target is $15.
BHP Billiton weekly chart…
BHP looks similar to VALE and FCX, except there is no Ascending Triangle, but rather a short-term lateral trendline with a high of $44.62 to conquer from September of 2017. The price has taken out the 200 EMA and must decisively take out the lateral for it to continue forward. The DMI-ADX is setting up with positive momentum, and the StochRSI is upper bound, with a history of remaining on the high side during extended price moves. Volume could use a kick, but the accumulation phase that took place immediately after 2015 came with solid buying volumes that put in a good base. A near-term target is the low $50’s.
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