Buying gold miners

[Mike]

This is a longer term view of how I approach buying gold miners. I currently hold AEM.

First I wait until a medium to long term bottom is suspected in the gold market. I use the Weekly and Monthly Coppock curve on gold to determine a probable bottom. A coppock curve can be added to a freestockcharts.com chart and a write up on the method can be found on Wikipedia with the variation adopted by Jerry Samet (the guy who writes the daily Leaders Index report).

Here is the weekly coppock on gold futures: Notice the buy signal depicted by a rise of at least one point off the trough formed below the zero level. Monthly coppocks are slow movers and usually signal late. The monthly coppock is in the process of forming a potential trough, the first trough since 2001. If the monthly signals it will be a major decadal low.



This chart is of AEM. Once I have determined that a gold low is forming I look for a liquid stock in the sector with a well formed chart pattern and positive EV divergence. AEM was purchased on the day that it passed through the 50-day moving average on pocket pivot volume.

[Mike]

I have done a mid week update to the watch list and added the following short candidates:
NUS, CREE, LGF, and RAX. I am waiting further developments before adding GMCR and KSU to the short list.

[Harry]

I thought it might be fun to look at Gold Miners from a Midas perspective around the time of Mike's trade (Jan 10th.) Please ignore the dates, I'm using Yahoo weekly data and Yahoo uses the next Monday for the weekly.

First up is GLD



As you can see, it's still a bit away from break the downtrend.

Next up is GDX



GDX is setting up to break through the downtrend.

Finally is AEM



AEM formed a base, bounced off the support curve and convincingly broken through the downtrend.

As today's updated charts show, a great trade. Thanks for sharing Mike!

[ericoleman]

Thanks for the presentation Mike. What sort of timeframe do you have for this type of trade? Very appreciated.

[Mike]

Thanks for the presentation Mike. What sort of timeframe do you have for this type of trade? Very appreciated.

If gold is putting in a long term bottom my time frame of this trade is more than one year. Yesterday gold got turned back at a critical juncture. It will take some time to figure out if I have been faked out. The chart below shows that gold got turned back at a downward resistance line out of a possible bear flag pattern. Gold needs to get back above this line.