![$HUI - Gold Stock Index $GDX $GLD
The HUI gold index met resistance at the previous highs and has now backtested the recent neckline breakout. We are currently doing what we call the “ping pong move” between the old high and the NL. You will hear us refer to this backtest of previous resistance as “step 2” in our common 5 step series of moves markets often take during breakouts of important levels [e.g. new highs for the unhedged gold stock index].
There is of course no guarantee that this level will hold - but we consider this range a buy zone with a sell stops below the buy zone. This neckline (NL) could have a “hard” backtest that goes slightly below our first noted support zone. This is pretty common. Another alternative is the level does not hold and prices slide further. We are currently sitting on fanline #4 and the backtest appears close to complete. If the level doesn’t hold, a slide back to either the bottom of the rising red wedge or fanline #3 is possible. See our HUI Fanlines chart for specifics.
The old high was an obvious target for many reasons. In 2008 gold stock prices completely crashed in spectacular fashion. A group of us gold traders had ridden gold stocks to incredible heights between 2001-2008. We also were heavy put buyers in companies most affected by the sub-prime / banking collapse during 2007-08. This was our a hedge to the threat of a deflationary collapse and it worked wonderfully starting with Countrywide leap puts in February 2007. When the deflationary bank collapse began to really unravel with the collapse of Lehman Brothers the rate of inflation expectations fell dramatically - led by the mining stock prices.
Some gold stocks collapsed to pitiful levels totally unimaginable at the time. The HUI eventually bottomed within 5 points of where our projections were by fall 2008. Look where IAG - IamGold was at the October 2008 lows - 2.20 a share. Last week it reached 21 a share - an 850% return in the stock alone in a little over a 1 year period. If you’re rolling call postions forward - you had found the golden goose. It would be irresponsible to ride this stock up so much and not book hefty profits along the way or hedged your profits into year-end through the use of put positions.
I can think of no better performing sector between 2001-2008 than precious metal stocks. The collapse was the buying opportunity of a lifetime. Unlike all other sectors, gold stocks collapsed the hardest and have rallied incredibly to challenge their all time highs. The price of gold is actually leading relative to most gold/silver stocks which haven’t made new highs. Keep your eye on this sector very close - especially if you have chosen to ignore it for many years.](http://27.media.tumblr.com/tumblr_ku5a0tY8at1qzl1bro1_400.jpg)
$HUI - Gold Stock Index $GDX $GLD
The HUI gold index met resistance at the previous highs and has now backtested the recent neckline breakout. We are currently doing what we call the “ping pong move” between the old high and the NL. You will hear us refer to this backtest of previous resistance as “step 2” in our common 5 step series of moves markets often take during breakouts of important levels [e.g. new highs for the unhedged gold stock index].
There is of course no guarantee that this level will hold - but we consider this range a buy zone with a sell stops below the buy zone. This neckline (NL) could have a “hard” backtest that goes slightly below our first noted support zone. This is pretty common. Another alternative is the level does not hold and prices slide further. We are currently sitting on fanline #4 and the backtest appears close to complete. If the level doesn’t hold, a slide back to either the bottom of the rising red wedge or fanline #3 is possible. See our HUI Fanlines chart for specifics.
The old high was an obvious target for many reasons. In 2008 gold stock prices completely crashed in spectacular fashion. A group of us gold traders had ridden gold stocks to incredible heights between 2001-2008. We also were heavy put buyers in companies most affected by the sub-prime / banking collapse during 2007-08. This was our a hedge to the threat of a deflationary collapse and it worked wonderfully starting with Countrywide leap puts in February 2007. When the deflationary bank collapse began to really unravel with the collapse of Lehman Brothers the rate of inflation expectations fell dramatically - led by the mining stock prices.
Some gold stocks collapsed to pitiful levels totally unimaginable at the time. The HUI eventually bottomed within 5 points of where our projections were by fall 2008. Look where IAG - IamGold was at the October 2008 lows - 2.20 a share. Last week it reached 21 a share - an 850% return in the stock alone in a little over a 1 year period. If you’re rolling call postions forward - you had found the golden goose. It would be irresponsible to ride this stock up so much and not book hefty profits along the way or hedged your profits into year-end through the use of put positions.
I can think of no better performing sector between 2001-2008 than precious metal stocks. The collapse was the buying opportunity of a lifetime. Unlike all other sectors, gold stocks collapsed the hardest and have rallied incredibly to challenge their all time highs. The price of gold is actually leading relative to most gold/silver stocks which haven’t made new highs. Keep your eye on this sector very close - especially if you have chosen to ignore it for many years.
