Gold Miner ETFs: ‘Raging Bulls and Raving Bears’

August 29th at 9:03am by John Spence

Gold miner ETFs represent a key battleground between bulls and bears as trading volume and volatility pick up. In other words, gold miner ETFs are a trader’s dream right now.

Market Vectors Gold Miners (NYSEArca: GDX) was set to open lower Thursday for the third straight session. However, the miner ETF is higher the past couple months in sloppy trading after hitting a multiyear low in late June. The fund has also climbed above its 50-day moving average for the first time in nearly a year.

From a technical perspective, traders are watching a bullish inverse “head and shoulders” pattern in GDX. The ETF has been pushed back this week at the “neckline” of the formation. Yet a sustained breakout above $31 a share in GDX would trigger the bullish technical pattern. [GDX Could See Pullback]

Trading has also accelerated in leveraged ETFs for gold miners. For example, Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) and Direxion Daily Gold Miners Bear 3X Shares (NYSEArca: DUST) provide 300% leverage on a daily basis.

GDX, NUGT and DUST have also been trending recently on social media platforms such as StockTwits. Additionally, charting site StockCharts says NUGT and DUST have been trending on its “ticker cloud” of popular securities.

This suggests there is not much middle ground on gold and miners since “chartists are either raging bulls or raving bears,” StockCharts said. The divergence in sentiment means gold miner ETFs should continue to see elevated trading volume and volatility.

Market Vectors Gold Miners

Full disclosure: Tom Lydon’s clients own NUGT.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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