GDXJ Junior Gold Miners ETF Setting Up Bullish Flag Pattern

Almost everything gold and silver related printed a reversal day candle. GLD’s recent low volume move raised a red flag. The last white bullish candle’s open and close are enclosed within today’s black and bearish candle. The name of this candlestick formation is ‘bearish engulfing pattern’.

Here’s a quote from ‘Japanese Candlestick Charting Techniques’ from Steve Nison on ‘Engulfing Patterns’ page 39:

“Some factors that would increase the likelihood that an engulfing pattern would be an important reversal indicator would be:

• 2. If the engulfing pattern appears after a protracted or very fast move. A protracted trend increases the chance that potential buyers are already long. In this instance, there may be less of a supply of new longs in order to keep the market going up. A fast move makes the market overextended and vulnerable to profit taking.”

This more or less describes what I was recently thinking regarding the precious metal complex. I felt we were overextended and decided it was too dangerous for me to chase this move. I don’t think today’s price action is the start of a long lasting trend reversal. Judging from the charts I believe odds are higher for this to be a pause in order to build bullish continuation patterns. Then again it doesn’t matter what I think. I will just watch the charts as they will tell me what to do.

Tonight I started drawing potential bullish flag chart patterns into several gold and silver related stocks on my public list. Today’s high is a great pivot point one can use as the starting point of a trend line for bullish flags or wedges. The next 2 weeks will separate the wheat from the chaff. GDXJ – Junior Gold Miners ETF might provide an interesting entry soon.

Up-to-date GDXJ – Gold Junior Miners ETF chart on my public list.

Now my job is to patiently wait for the pattern in GDXJ to set up.

Successful traders isolate themselves from the opinions of others. – Linda Bradford Raschke

My public list with all my charts can be viewed here:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2791469

Buenas noches!