Gold Shares – Pointing Up Or Down?

Gold shares lead the way. Right?

Then what do you think about GDX and GDXJ both finishing the day with outside reversal day patterns?

GDX

GDX

And GDXJ

GDXJ

GDXJ

 

Otherwise known as bearish engulfing patterns, these often lead the way down, especially if confirmed by a lower candlestick bar the next day.

Only a week ago, we had another set of outside reversal day patterns for both stocks. It was only on Monday that GDX was able to negate that pattern and it was only Tuesday that GDXJ negated the pattern and became bullish again. And now they are both looking bearish again.

Why are the miners chopping and changing direction like this?

It’s because of the uncertainty surrounding the ECB announcement about bond purchases. Some of the details have seemingly leaked out already and we are meant to be looking at approximately €50 billion bond purchases per month over the next year.

The mining stocks, which can be bid up during risky times may now see this as a less risky environment. Investors may think that money flows will go into other areas than the mining stocks. Hence the outside reversal patterns, or bearish engulfing patterns, that were formed today.

We will have to see what the market thinks tomorrow.

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