GDX and GDXJ ETFs
GLD prices declined, as we discussed in the previous part of this series. Gold and the GLD ETF’s price movements are important for the iShares Gold Trust (IAU), the VanEck Vectors Gold Miners ETF (GDX), the VanEck Vectors Junior Gold Miners trust (GDXJ), and gold mining companies like Goldcorp (GG) and Barrick Gold Corporation (ABX).
The GDX ETF consists of publicly traded small, medium, and large companies involved primarily in gold mining. On the other hand, the Market GDXJ ETF consists of small and medium companies involved in gold and silver mining. So, the GLD ETF or gold price movements directly affect the margins of the GDX and GDXJ ETFs.
Support and resistance: The GDX and GDXJ ETFs
GDX and GDXJ are leveraged plays on gold prices. The decline in gold and GLD led to declines in these ETFs’ prices. GDX ETF dropped ~1.73% and closed at $21.59, and GDXJ dropped ~3.73% and closed at $26.60 (percentage changes compared to January 28 2015). These ETFs saw huge fund flows during the previous week. GDX saw a net fund inflow of $344.77 million between January 22 and January 28, 2015.
Resistance for GDX is at $24 and $26. However, any bearish news could bring GDX to $20 and then to $18. The relative strength index (or RSI) is rising towards an overbought territory, so prices may rise a bit higher. However, it’s pretty close to overbought territory, which means the upside could be limited. The moving average convergence divergence (or MACD), however, is above the zero line—suggesting a positive price movement.
For the GDXJ ETF, we see resistance at $29 and support at $25. Just like GDX, the relative strength index (or RSI) is rising towards overbought territory. However, the moving average convergence divergence (or MACD) is above the zero line, suggesting a positive price movement. This suggests a positive price direction in the short term.