Overview of GDX

This is not meant to be specific, however it is meant to address what some people are seeing as a break of a H&S trendline. This is also one of the reasons I prefer NUGT (3x long gold miners) ETF over GDX calls, I think time is on GDX's side and NUGT seems like a better way to play that than options.

 This is the H&S people are seeing in GDX on a 60 min chart, today it would have broken the neckline so other traders are seeing it as well, but many technical traders only see the price pattern and assume it's a H&S top, a lot of bears got burned in 2010 because they looked at price only and did not verify a H&S top with volume and it broke out to the upside after they were shorting this for 6 months.

I'll just mention for new members, there are only 3 places I'll short a true H&S top, 1) is the top of the head, 2) is the top of the right shoulder and 3 is AFTER a break below the neckline and a rally that technical traders EXPECT to fail at resistance (former support/the neck line),  I'll only short it AFTER price has moved above the neckline and shaken out all of the recent shorts, this happens with increasing frequency no matter how many times you see a textbook/cherry picked H&S failing at the neckline every time, that's not reality any more.

 The check for a H&S is volume, to make it easier I created this cumulative volume indicator real quick, in a true H&S it should see volume diminish in to rallies like the shoulders or the head and volume should increase in to the declines down to the neckline, that's not what's happening here.

Beyond that, the first rule is a H&S top MUST proceed an uptrend, this doesn't so the very first test it fails and it fails the volume test.

 An alternate view that volume does confirm as well as the preceding trend is an inverse H&S bottom, it would also be at the right place for a shakeout of a true H&S top, that 3rd place I'll short a H&S.

This would be a complex pattern with 2 left/right shoulders.

 On a 5-day chart here's the large H&S that you couldn't see before, the area with the yellow arrow is the inverse H&S bottom. The yellow arrow shows the shakeout of shorts (the last place I'll short a H&S) and the red arrow shows what happens after all the shorts are squeezed out above the neckline.

Obviously this too is a complex top.

Looking at a 15 min chart, the recent break today below some support or what some see as a neckline has a VERY positive divegrence, smart money wants to accumulate on the cheap, not in to rising prices, hitting stops and triggering limit shorts is an easy way to produce the kind of supply they need to accumulate without moving price against them.

This 30 min chart shows the same powerful positive, it's very powerful on a 30 min chart and we even have 60 min signals.

I'm fine holding NUGT long, I'm not so happy about GDX calls, but I think we will get there. I'll be keeping an eye on the intraday charts, the NUGT long is still in play.