Miners have been chastened by falling gold prices, declines that have highlighted rising debt levels on the balance sheets of firms found throughout GDX and GDXJ.
Things are likely to get worse for the miners if gold violates $1,100 per ounce. As RBC notes, some companies, including some found in GDX, can survive an environment in which gold labors around $1,200 per ounce, but the $1,100 area is where some miners will be pinched. [Problems Mount for Miners ETFs]
Still, the odds look good that miners will continue to move higher after last Friday’s pop.
“Gold Miners ETF GDX looks to have created a bullish falling wedge pattern, which results in higher prices around 65% of the time. Another potential positive for GDX is that this pattern is taking place at the bottom of this multi-year falling channel with momentum oversold. Bullish wicks have taken place the past two weeks as well,” said Kimble.
Chart Courtesy: Kimble Charting Solutions
Tom Lydon’s clients own shares of GLD.