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How Precious Metal Investors Can Use Gold Stocks

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Charts show that precious metal stocks may trade sideways for some time.

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Previously, I've covered the situation in the US Dollar, gold and silver markets, but because there's more to the precious metals sector than just these two metals, I've decided to supplement the previous analysis by covering the precious metals stocks. If you're interested in trading only gold and silver, you might want to reconsider before clicking that "X" in your Web browser's window -- after all, precious metals stocks are highly correlated with the metals, and they even used to lead the metals in the past. Consequently, even if you're not interested in trading or investing in the precious metal stocks, you might still benefit by analyzing this part of the sector.

Let's begin commenting on the precious metals stocks, by analyzing the long-term chart of the HUI Index:


Source: StockCharts.com

Two weeks ago I wrote the following:

The analysis of the long-term HUI chart suggests that gold stocks may need to move a little higher before forming a temporary top. In the past, local tops have been formed after the HUI Index moved above the 50-day moving average, which hasn't been the case yet.


During the past several days, the HUI Index has in fact moved above the 50-day moving average, which meant that one might expect a local top to be reached sooner rather than later.

Moreover, the situation on the short-term chart suggests that a short-term resistance level has been reached.


Source: StockCharts.com

Not only did the value of Market Vectors Gold Miners ETF (GDX) move to the declining resistance level (blue line), but it also failed to confirm the breakout above the 38.2% Fibonacci retracement level (black horizontal line near 45.5).
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No positions in stocks mentioned.
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