Click to EnlargeEven though gold and silver themselves have been quite bearish, the Gold Miners Bullish Percent Index (BPGDM) is at its lowest levels since 2009. When you have a high reading like the 72.41 of October 2012, you generally have little tops in the market or index, depending on what you’re tracking. When you have low readings with some divergence, like the 7.14 of April 2012, you get a rally. And so in this case, the Market Vectors Gold Miners ETF (NYSE:GDX) went from being down 10% to being up nearly 15% a few months later.
One interesting thing within GDX and other gold instruments like Market Vectors Junior Gold Miners ETF (NYSE:GDXJ) and the Gold Bugs Index (INDEX:HUI) is that they tend to put in bullish outside key reversals. So I’m looking to GDX for a short term setup that could buck the trend even during a market decline.
It may interest day traders to know in my Power Trading at the Open advisory service, we recently roundtripped the GDX April 38 calls for 18.75% in the space of a few hours. However, I like to recommend trades that give you a bit more time on 24/7 Trader.
So for swing traders, I recommend buying to open GDX for a target of $42.00.
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.