When you’re using any type of bullish percent index, like the Gold Miners Bullish Percent Index (BPGDM), when you’re below 30, stocks are buys. When you’re above 70, stocks are sells. We are at an historic low level, meaning it’s the most awful, awful, awful time that anybody wants to buy gold stocks. It has never been worse, ever, in the history of everness.
So, where does that leave us? I have my Trending123 traders in initial positions in Market Vectors Gold Miners ETF (NYSE:GDX), and the next area to buy and accumulate on dips would be when the GDX breaks out of the pattern I show you on the chart in the video.
Right now, the BPGDM is in the 3s, but I look at GDX’s chart of what happened to its price when the BPGDM had a reading of 4 in 2008. I look at the monthly chart in the video to show how GDX was trading between $15 and $20 when the BPGDM was in the 4s. After that super low reading on the BPGDM – which, again, is higher than where we are now – the GDX went from the mid-teens all the way up to $65. That’s where it topped in 2011, as I show you on the chart in the video.
You can actually correlate the Bullish Percent Index charts with highs and lows in sectors, the markets, etc. So, if anybody bought gold stocks in 2008 – in this case, the GDX – in the teens, you got to hold on for a profit in the hundreds of percents if you just waited to sell when the BPGDM elevated. We actually played gold stocks during that timeframe in Trending123, and the BPGDM’s readings are the reason we’re back in them.
But a word of caution: Trying to use the BPGDM to pick the exact bottom is virtually impossible, especially when you’re at historic lows. All we know is that when the BPGDM gets down into the single digits, gold stocks are a buy.
InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the Open, Parabolic Options and Trending123. For more information on which service is for you click here.