It’s time to get back into the gold sector.
The Gold Bugs Index (HUI) has fallen 17% over the past seven weeks. The sector is now oversold.
It’s trading back down to where it was at the start of the year.
And, the chart pattern resembles the same setup HUI had in March – just before the index spiked 30% higher in just over one month.
Take a look…
HUI recently made a lower low by falling below its lowest closing price in May.
Meanwhile, all of the technical momentum indicators at the bottom of the chart have been rising during the recent decline in the gold sector.
This “positive divergence” usually occurs near the end of a decline phase and is often an early warning sign of an impending rally.
This action isn’t an exact match, but it is similar to how HUI behaved in early March, just before the gold sector blasted 30% higher.
There’s no guarantee we’ll see the same sort of pattern play out this time around. But, the chart looks promising enough to justify adding some exposure to the gold sector.
When we looked at the gold stocks two weeks ago, we noticed the Bullish Percent Index for the sector (BPGDM) had declined. But, it still needed to work a bit lower before it was “safe” to venture back into the gold sector.
Readers who have been paying attention may have noticed the BPGDM has fallen to 43.
That’s not oversold enough to justify going “all in” with the gold stocks. But, it is at levels that justify taking some starter positions.
Traders should look to buy into gold stocks on any weakness in the coming days.
Best regards and good trading,
Jeff Clark
Source: Jeff Clark Trader