In this case, further support is provided by the highs of the last base (resistance always becomes support after the resistance is broken).
However, all bets for another rally are off if $GDXJ fails to hold above its 50-day MA, which is definitely the “line in the sand” with this setup.
Furthermore, this trade setup will no longer be appealing if $GDXJ does not wake up and rally above the highs of its recent range within the next few days.
Pullbacks off the highs that are succeeded by tight-ranged price action should snap back quickly after shaking out the “weak hands.”
Go Confidently, But With Vigilance
Given the lack of follow-through in the stock market lately, we are pleased that the chart pattern of this low-correlation ETF is presenting traders with such a low-risk buy entry point.
Still, we must remain vigilant with all new trades now, and not be afraid to quickly scratch the trade, or bail for a small loss, if this gold mining ETF does not catch a bid soon.
This article is brought to you courtesy of Morpheus Trading, LLC.