Another day, yet another higher close in the junior miners. And yet another day where profits on our long positions in the latter increased.
Since the GDXJ is so close to our profit-take level, in today’s analysis, I’ll zoom in on this important ETF. As for other markets, my previous analysis remains up-to-date.
The GDXJ ETF moved up by over 2% on Wednesday and it’s now very close to our target area. The RSI is also above 50, and it was the case quite a few times in the past, when this meant that the corrective upswing was about to end.
Please note the late-July 2021, early-September 2021, late-December 2021, and mid-January 2022 tops. They were all preceded by a move in the RSI from about 30 to above 50. And we just saw this kind of signal once again.
So, maybe the top is already in?
Actually, if we zoom in, we get an extra clue that suggests that we’re about to see (at least) another brief move higher.
Namely, the GDXJ ETF just closed slightly above the lower border of the early-May price gap. Upper and lower borders of price gaps serve as support and resistance levels. In fact, some people even apply Fibonacci retracements to these levels and create additional support/resistance levels in this way. Still, the borders of the gap are most important.
Now, the resistance provided by the lower border of the price gap was just broken, as the GDXJ just closed slightly above it. And as resistance is broken, the price is likely to move higher and then stop at the next resistance.
The strong next resistance is provided by the upper border of the price gap. It’s not just that, though. This level – before becoming the upper border of the price gap – has already served as support in very early May and then about a week later. Additionally, this level corresponds (approximately) to the 38.2% Fibonacci retracement level based on the entire April-May decline.
Consequently, it’s likely that the next stopping point for GDXJ will be there – slightly above $41. And it could be the case that it’s the final short-term top. As you know, to increase the chances of the trade being realized and profits being cashed in, we have the exit order a bit below this level. It seems that it will be reached shortly.