This is the update on the GDX analysis I performed on November 22, 2012. Read it here to catch up. At that time the price was about 48 and I concluded the analysis with the following:
Meanwhile, the price is testing the 48.50 resistance level again. In case the price goes through it, the test of the 50.50-51 resistance level is, likely, next. A failure to clear the 48.50 level may lead to a fall to the 43-43.50 support area.
The medium-term chart status: Bearish.
The chart look is slightly different from November’s chart. I adjusted the box size to the current volatility (0.6 instead 0.5) to filter noise. As a result price targets and support/resistance levels increased by a small margin.
The price failed to break through the 48.5 level and fell as low as 43.70 since then. Actually, what we see is a tag-of-war between the bulls and bears over the last two months. And it is not going to end pretty. A massive congestion pattern is forming. Both sides are building solid arguments for winning.
If the bulls push the price to 48 then the falling Bearish Resistance line will be broken and a strong Triple Top buy signal will be issued (lime box). However, it doesn't seem enough in the current situation. There is a strong level of resistance at 48 and the bulls still need to clear the 48.5-48.6 level for a breakout confirmation.
The bears, on the other hand, are two boxes away from generating the most powerful Bearish Catapult sell signal at 43.2 (pink box). The 43.2 level coincides with the meaningful support, so the bears better clear it down to 42.6 similar to the case with the bulls.
Let’s go to the 1-box reversal chart to calculate the potential price targets for both sides from this congestion pattern.
The most price action is occurring in the middle of the pattern. It’s not clear whether accumulation or distribution is taken place. The potential upside price target from this pattern is at 58.2 currently and the potential downside target is at 33. Note that the pattern is still in making and the potential targets can change. We will not know whether it is the upside or downside count and the target it yields until the breakout.