At the first of January our Twitter momentum indicator for gold stocks (GDX) gave a buy signal. If you’ve followed our trade plan for GDX you have either closed the trade or are still holding one third of the position. Momentum broke the uptrend on the 28th of January. This was the signal to close the trade or take more profit.
GDX is now setting up for another potential long trade. After consolidating gains from the rally out of the December lows GDX has retraced back to its 50 day moving average without serious damage from sentiment on Twitter. 7 day momentum is painting a somewhat weak triangle pattern so you should be cautious on the trade. If momentum breaks higher then a buy signal will be triggered where you can initiate a new trade or add to your current holding.
On the other hand, if you still have a third of the position I’d close it if the new up trend line in momentum is broken to the downside. Especially if the 50 day moving average is broken at the same time. If you’re committed to GDX, believing that it is making a long term trend change, and have followed our trade plan then you have enough profit to let the trade retrace 50% to 67% of the prior rally before abandoning it (the current retracement is 40%). Bottom line, it’s make or break time for GDX so keep a close eye on it.