Resource Stocks Breaking Out Of Bases and Forming New Uptrends (GLD, SLV, GDX, GDXJ, URA, UUP, TLT)

Share This Article
January 18, 2012 5:03pm NYSE:GDX NYSE:GDXJ

Jeb Handwerger: The end of 2011 and the beginning of 2012 greeted investors with spooky market stories to scare investors. A prominent cartoon in the Wall St. Journal depicted a pretty lady shrieking, “The DOW Sank 17%”. Another balloon read “The US Loses Its AAA Rating”. She is screaming, “Who


Will Fix Europe?”. Another caption reads, “$71 Billion Yanked From U.S. Stock Mutual Funds”. Another hysterical cry exclaims, “I Want Treasuries!”. As if that cartoon wasn’t enough to scare readers, the headline read, “Spooked Investors Seek Safety: Volatile Quarter Leaves Market Victims Wondering What Is Next”. Another ghastly pronouncement we wrote in early October to the surprise of many was, “Beware Of Stock Market Rallies Ahead”.

There was altogether too much gallows talk in circulation when we sent out the above chart on the S&P500 (NYSEARCA:SPY). We were brief and to the point and expected a potent rally especially in our oversold uranium (NYSEARCA:URA) and rare earth miners (NYSEARCA:REMX). In early October, we noticed positive signals on our indicators suggesting that an impressive rally was in the offing especially in our deeply oversold industrial metal miners (NYSEARCA:DBC).

Cutting straight to the chase we have witnessed a potent rebound where many of the oversold miners rebounded impressively in 2012. This demonstrates that there is plenty of cash waiting on the sidelines to continue supporting a strong rally. As we said, “When the need is sorest, so the answer comes soonest.” Suffice it to say, that the rally in the undervalued junior (NYSEARCA:GDXJ) and industrial (NYSEARCA:REMX) miners has begun and is continuing.

As we write Bernanke is testifying that the “Federal Reserve is ready to take further actions to spur growth”. They are meeting next week and may announce a transparent horizon of accommodative actions. This is in keeping with our expectations of a potent, surprise rally.

The recent rally in the U.S. dollar (NYSEARCA:UUP) and the long term treasuries (NYSEARCA:TLT) represents a thin blanket for a cold night that is not going to last. This liquidity crisis is presenting a buying opportunity for promising, oversold and beaten down natural resource equities which have been pummeled in a merciless market. Since early October, we are continuing to watch this impressive rally and the breaking out of many quality companies into new uptrends.

Gold’s (NYSEARCA:GLD) accelerated move to $1900 prior to the decision past overhead resistance indicated the market was waiting for an inflationary QE3. The market got a surprise as Bernanke announced a tepid twist. Negative news which causes a temporary decline with a rapid recovery indicates resilience. The precious metals market appears to be finding its footing and now may return to close some of those downside gaps created in 2011.

The recent selling panic in gold (NYSEARCA:GLD) and silver (NYSEARCA:SLV) bullion at the end of 2011 has abated and reversals are beginning to occur.

The uranium (NYSEARCA:URA), silver (NYSEARCA:SIL), copper (NYSEARCA:COPX) and rare earth stocks (NYSEARCA:REMX) appear to be breaking downtrends and out of bases. The juniors (NYSEARCA:GDXJ) look like they are beginning to outperform the majors (NYSEARCA:GDX). The smaller miners have reached compelling valuations that long term, contrarian investors can use to their benefit by adding to positions or initiating purchases in favorite stocks or sectors which one has not participated in yet. We must understand the long term trends and realize this is a rare opportunity to pick up resource stocks just beginning new uptrends and breaking out of bases. Don’t ignore this recent rally.

Stay tuned to my free newsletter for any developments.

Written By Jeb Handwerger From Gold Stock Trades Disclosure: Long GLD,SLV, and GDX

I started reading charts at eleven years old. One day my father, a  market trader and technician found his library of books on technical  analysis mysteriously disappearing. He later found the textbooks under  my bed. For many years day and night I studied technical analysis and  charting, working and learning from my father who has over 50 years of  trading experience. Technical analysis is my passion and love. In 2001, I  started noticing the junior mining stocks and gold as having a  tremendous upside. For the past 9 years I have researched many juniors  and have identified the major winners using technical analysis and  finding top management. I earned a Bachelors Degree in Mathematics and a Masters Degree. I  learned most of my technical analysis from the school of hard knocks,  managing real money for myself and for my family. Constantly perfecting  my craft, I have traded for two decades of success in many different  markets. I have been asked to post ideas to some of my students who have  taken my course in charting and technical analysis. I have made an  excellent living trading stocks for myself.


9 "Must Own" Growth Stocks For 2020

Read Next



Get Free Updates

Join over 50,000 investors who get the latest news from ETFDailyNews.com!

Most Popular



Explore More from ETFDailyNews.com

Free Daily Newsletter

Get daily ETF insights from our market experts. Never miss another important market development again!

ETFDailyNews.com respects your privacy.

Best ETFs

We've rated and ranked nearly 2,000 ETFs and ETNs using our proprietary SMART Grade system.

View Top Rated ETFs

Best Categories

We've ranked dozens of ETF categories based on relative performance.

Best ETF Categories