GDXJ Gold Stock Review

 

GDXJ-June-4-2016

 

The violent move up on Friday created one massive gap in many, if not all gold stock related asset classes. This means that gold stocks are not going to the moon just yet as the gap may get backfilled, before gold stocks can advance on another big leg up.  As much as GDXJ looks like GDX,  there are huge differences between the two. This GDXJ created a potential expanded top pattern as the HUI and GDX did not.   Still, if investors know how to feather into a position and got lucky and averaged in at $19 or so, then they would have had a 100% gain already. Of course that gain would only show on paper as you would have to sell to lock in any gains.  

Who in their right mind would sell out as this is a bull market going to the moon? Sure, this can be true but not too many bull markets start out this violently and then maintain its accent. We have to see if gold stocks add on a bigger impulse or just sputters out with another double top like pattern.  Any double top would suggest a potential diagonal 5th wave and that would mean another violent move to the downside could happen.

If a an “E” waves crash occurred, then yes, I could see another impulsive leg up. As it stands, I’m not very confident in the staying power of this bullish run.  Below this price level we have a minimum of 4 gaps that need to get closed off, sometime in the future. Sure, gaps can stay open for a long time, but eventually they have a 90% chance of getting filled.