Junior Miners ETF Consolidates, Looks for New Highs

ETF Trends

After surging 26.6% in June, the Market Vectors Junior Gold Miners ETF (GDXJ) looks like it might be taking a short breather before starting a new leg higher.

That is not a bad thing given the stellar performances turned in by gold mining ETFs this year, performances that include 26.3% year-to-date surge. That gain is enough to place the $2.3 billion ETF among this year’s top-10 non-leveraged ETFs. [Miners ETFs Could be Poised to Soar]

“After a 40% rally off the lows at $20, GDXJ is potentially forming a 16-week cup with handle type pattern on the weekly chart,” according to Deron Wagner of Morpheus Trading Group.

Wagner adds that it would be a positive sign for GDXJ bulls to see volume wane over the next few weeks before buyers become more vigilant and bid the fund higher.

“The handle portion is the current tight consolidation. Ideally, the volume should taper off as the price action chops around for a few weeks. Note that the 10-week MA (teal) has crossed above the 40-week MA (orange), which is a bullish trend reversal signal,” said Wagner.

Bolstering the near-term bull case for mining ETFs is bullish action in gold itself. Last month, the SPDR Gold Shares (GLD) gained 6%. [Gold Grab is Back; Good for ETFs]

Assets in GLD, the world’s largest gold ETF, jumped 1.4% to 796.39 metric tons in the two sessions through Tuesday, reports Debarati Roy for Bloomberg. That’s GLD’s best two-day gain in nearly three years and comes after more than 550 tons were pulled from the fund last year, according to Bloomberg.

GDXJ is not the only miners that could soon shoot higher. On Wednesday, the Global X Pure Gold Miners ETF (GGGG) gained almost 1% on volume of 107,000 shares compared to average daily turnover of 3,700 shares. GGGG’s assets under management tally could increase by 25% as a result of Wednesday’s action in the ETF.

Market Vectors Junior Gold Miners ETF

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ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GLD.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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