12 A classic double bottom pattern has certain technical characteristics. It is probably the most well-known pattern, but a real double bottom occurs very rarely, and only at the end of a bear market or major intermediate correction.
13 The current sell-off in gold stocks certainly qualifies as either a major correction or a full bear market. As price makes the first low, the technician wants to see volume spike sharply, and that happened here.
14 Many investors were in a state of panic as that first low occurred, and their selling is what produced that enormous volume.
15 The second low in a classic double bottom pattern needs to occur at least a month after the first one, and it should occur on much less volume. You can see that the volume on the 2nd low is dramatically less than the volume at the first low.
16 Another key “textbook” characteristic of the second low of this formation is meandering price action. Note the small black box I put on the chart. You can see that GDX price movement is currently weak and aimless.
17 The good news is that the double bottom pattern on the GDX price chart is technically perfect. The bad news is that you are living through a “super-crisis”, where personal surprise is the main theme.
18 The double bottom pattern that has formed on GDX and many individual issues is a very positive event, but it is not a guarantee. If the bearish head and shoulders pattern wins the clash of the titans fight against the bullish double bottom, it’s critical that you are able to buy GDX in the $36 area.
http://www.321gold.com/editorials/thomson_s/thomson_s_072412.html
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