If last week’s low holds, higher prices are likely.

The top gold mining ETF by both volume and total assets is the VanEck Vectors Gold Miners ETF (GDX). GDX hit resistance at $25.58 four weeks ago following the breakout of a multi-month symmetrical triangle consolidation pattern at around $23.20. Subsequently, GDX moved into a retracement​ that so far has seen a drop of 10.8%. That’s as of the $22.81 low hit last Friday. That low is in a potential support zone defined by the downtrend line (resistance becomes support), the 61.8% Fibonacci retracement of the most recent rally off the July $20.99 low, which is at $22.74 (close enough), and the area of support of the 200-day exponential moving average (ema), which is now at $23.08.

So far, price behavior since breaking out of the triangle is behaving normally. Upward momentum increased following a breakout above the falling trend line at the top of the triangle. As of last week’s low that that line was tested as support and has so far held. In other words, previous resistance (at the trend line) has now been tested as support. An additional bullish intermediate-term bullish signal is indicated by the moving average crossover of the 55-day EMA (pink line) moving above the 200-day ema (blue line) that occurred in late-August. A continuation of the initial rally can now be anticipated.

The first potential target zone is identified on the enclosed chart with a red rectangle and is from around $26.49 to $26.89. That price zone is derived by identifying targets from three Fibonacci projection measurements, along with the target objective from the symmetrical triangle pattern. A higher target would be around 28.00, which is the target calculated from a measured moved swing pattern.

The completion of the measured move is identifying the price target where the advance of the second leg up off the December bottom matches the advance of the first leg up. The second leg up starts at the July low and the first leg up starts at $18.58 from last December.

Of course, a drop below last week’s low means recent support is not holding and further weakness may be forthcoming before the rally is ready to continue, if it is to do so.

 The Bottom Line

  • Bullish breakout of symmetrical triangle consolidation pattern occurs seven weeks ago and is following by strong upward momentum.
  • GDX subsequently pulls back to Monday’s $22.81 low, where support is seen.
  • Watch for a way to now get engaged to take advantage a bullish continuation of the initial rally higher coming out of the triangle.

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