- In the world of technical
analysis, assets can be in uptrends, downtrends, or sideways
consolidations. Minor trends are typically 1-3 weeks long. In contrast,
intermediate trends usually last for a number of months. Primary trends
are the biggest trends of all, and they can continue for many years.
- Within this context, today I
want to address the concept of a technical return line, and
define the purpose it serves.
- A return line helps infer where
the asset might encounter resistance or support, and potentially
- A return line can be drawn in an
uptrend or a downtrend, or even in a consolidation. The current GDX
chart provides a superb example of how to use return lines in an
- Since bottoming in May, GDX has
been in an "intermediate term uptrend". Please click
here now. You are looking at the GDX daily chart, with one trend
line drawn across the minor trend highs. Those highs were created in
June and September. That trend line is a supply line, and we use it to
draw the return line.
- Please click
here now. You are looking at the same GDX daily chart, with the
return line drawn in there. This return line is a demand line that is
drawn parallel to the supply line.
- The purpose of this return line
is to suggest a price zone where the current GDX pullback may end. It is
a place for swing traders to buy the market, with modest risk
- If there is no HSR (horizontal
support & resistance) at the point of projected impact with the
return line, the amount of risk capital deployed should be extremely
- To see if there is any HSR present
in the area where GDX may hit the return line, please click
- Professional investors and
institutions tend to be leery about buying anything, if there is no HSR
in play. You can see that there is some solid HSR in the $49 area,
making it highly likely that serious players are now ready to buy gold
stocks in size. Once the election is over, they could engage in very
- In the biggest picture, GDX and related
gold stocks are very low priced, and offer tremendous value to
investors. It's easy to let a minor trend decline convince you that
price is going much lower, and will "never turn up".
- I don't think you will build any
wealth by trying to avoid price declines. You build it by setting
realistic price zones where you will buy a little bit of stock, and
GDX is approaching one of those key zones now.
- My long position in gold stocks
is currently 15 times bigger than my short position. I'll make it even
bigger if GDX arrives at $49 today. Don't be afraid of any number on the
GDX price grid. I'd like to see the gold community look in the mirror,
and show the banksters that no negative price
event will shake you from your positions.
- Predators in the market want you
to be afraid of price declines, so they can take your holdings from
- Is there a return line in play
on the GDXJ chart? Yes there is. To view it, please click
- I highlighted HSR in blue in the
$22 area, and that roughly coincides with a possible point of impact
with the return line. We can't know whether the price of GDXJ will
arrive at $22, or not. We can prepare our buy orders now, to take action
if it does. My buy orders are already in the market, and I hope you get
yours in there today.
- Because there was so much damage
done to individual junior stocks over the past 2 years, I think a
price of GDXJ $50 is required to undo most of that damage.
- Technically speaking, GDXJ has
been in an intermediate term uptrend since May, and appears ready to
move higher again. GDXJ $50 is a realistic number, but it will take some
- You can make it happen
"faster", by lowering the average price you have paid for your
junior resource stocks. Take action on the buy-side, in the $22-$23
- Do it professionally with very
modest risk capital, rather than with a heroic turn call and loans from
the banksters. If you can apply a little
capital to this market, perhaps GDXJ $45 becomes your "I'm
- Today is election-day in the
United States, and so far, the winning candidate is... gold! Please click
here now. Gold is up nicely today, and showcasing an ideal technical
situation; the green demand line and the green supply line are parallel
to each other.
- Whether you use the recent minor
highs or the recent minor lows to draw your uptrend and return lines,
the result is the same. My interpretation of this chart suggests that
gold will now rise towards $1850.
- While I believe the odds are 70%
that gold will trend higher, I'm prepared for the possibility of
substantially lower prices. I don't think the worst fears of investors
(gold going to $1000) will be realized. If "everything goes wrong",
and gold plummets, I believe you have no choice but to bring the
required intestinal fortitude to the table. Endure, and profit from the
- Fear must be professionally
managed. To do that, it must be compartmentalized. The good news
is that the next phase of this market probably won't require you to
compartmentalize any fear. As gold blasts over $1805, it will be greed
that we all must manage, and I think you all would agree that a little
greed right now, is just what the gold price doctor ordered!
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