There’s a rare pattern unfolding in the gold charts…
I’ve covered many different chart patterns in past Money Trends articles. But there’s one I’ve never mentioned…
And that’s because it’s quite unusual to spot it in real-time. Today, however, is one of those rare occasions.
Below, I’ll show you what this pattern is, and how you can spot it… along with the best way to play the opportunity that’s unfolding in the gold markets…
A Bullish Signal for Gold Miners
The chart pattern I’m talking about is known as a “double three.” And it’s flashing a bullish signal in the charts for the VanEck Gold Miners ETF (GDX).
I’ll get to why it’s called a double three in just a moment. First, I want to go over the price action leading up to this pattern, because I think it tells a very clear story.
Let’s take a look at the chart below, which shows GDX going back to late 2019…
On the left, we can see a strong rally that kicked off in March of last year and ended in August.
What is fantastic about this rally is that it counts very clearly as a five-wave advance. This tells me that the larger trend is still firmly to the upside.
Remember, in Elliott Wave Theory, five-wave rallies and declines help identify the larger underlying trend. Three-wave corrective advances and declines are indicative of a counter-trend price action.
When I see a five-wave price movement, I know there will be a counter-trend correction that will ultimately end as the price action gives way to that underlying trend.
This is what I expect we’ll see with GDX.
The decline since August does not look like the start of a fresh bear market. In fact, in due time, I believe we’ll see a fresh high in GDX that will exceed the August high of 45.78.
This alone is very valuable information.
Refining our analysis further, it becomes clear that there are two possible near-term outcomes for GDX. And this is where the aforementioned “double three” comes into play…
Two Possibilities, One Outcome
A double three is a drawn out, more complex variation of our standard A-B-C corrective pattern. As such, we will use the letters W-X-Y to refer to a double three correction.
While an A-B-C pattern tends to look like a clear, three-wave affair, a W-X-Y pattern usually has a choppier and messier look to it.
Each letter of the W-X-Y corrective pattern is made up of its own A-B-C correction. So, Wave W will be made up of its own three-wave A-B-C pattern, as will Wave Y.
Wave X is a connecting wave that bridges Waves W and Y. It will also be made up of its own three wave A-B-C pattern.
I labelled these subdivisions on the chart above so you can clearly see them.
Now, as I mentioned, this leaves us with two distinct possibilities. But both will ultimately result in the same outcome: GDX will go on to make a new high.
Let’s break down the two possibilities…
The first possibility is that we have yet to complete the final Wave C of Wave Y. This path is drawn out with the blue arrows in the chart above.
This would see GDX declining over the next several days to approximately 31 on the price chart, before it shoots higher.
The second possibility is that the entire corrective pattern has ended, and GDX is getting ready for an explosive move higher – without moving much lower first. This path is drawn out with the red arrows above.
Now, before we can eliminate one of the two possibilities, we need the price action to develop. And this is exactly why I like the double three pattern. It helps us be more precise with our entry points, so that we can better time the market.
Either way, a good trigger to go long GDX will be if we break above the high of Wave X, which comes in at 41.81. I would look for GDX to break above that before establishing a position.
Until next time,
Editor, Money Trends
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