GDX and GDXJ ETFs
Technical analysis of the GLD ETF shows there’s a possible change in the direction of gold prices, as we discussed in the previous part of this series. Gold and the GLD ETF’s price movements are important for the VanEck Vectors Gold Miners ETF (GDX), the VanEck Vectors Junior Gold Miners (GDXJ), and gold mining companies like Goldcorp (GG) and Barrick Gold Corporation (ABX).
The VanEck Vectors Gold Miners ETF consists of publicly traded global companies involved primarily in gold mining. These companies are small-, medium-, and large-capitalization stocks. The ETF has assets worth $7.2 billion. On the other hand, the VanEck Vectors Junior Gold Miners ETF consists of small and medium companies involved in gold and silver mining. It has assets worth $2.1 billion. So, the GLD ETF or gold price movement directly affect the profitability of the GDX and GDXJ ETFs.
Support and resistance: GDX and GDXJ ETFs
GDX and GDXJ are leveraged plays on gold price. The recent decline in gold prices should have decreased these ETFs’ prices. However, these ETFs gained because of large funds flowing into GDX and GDXJ. The GDX ETF added 18,200,000 units for a 6.1% increase week-over-week. GDXJ increased 4.1% in units week-over-week. This led to a rally of the GDX and GDXJ ETFs.
The current momentum could push GDX to the next resistance level of $24 and even $26. However, any bearish news could make GDX retreat to levels of $20 and then to $18. The relative strength index (or RSI) is in overbought territory. This suggests a negative direction for GDX prices. However, the moving average convergence divergence (or MACD) is above the zero line, so it suggests a positive price movement.
On the other hand, resistance for the GDXJ ETF is at $32 and support is at $25. Its relative strength index (or RSI) is rising towards overbought territory. However, its moving average convergence divergence (or MACD) is above the zero line, so it suggests a positive price movement. This suggests positive a price direction in the short term.