Bullish Signals Converge: Is a Precious Metals Rally Imminent?
Just a quick update tonight so I can show you a few charts on why I decided to load up on the PM stocks today with 18 of 20 positions.
This first chart is a weekly chart for the HUI which we just looked at recently. The dominant pattern on this chart is the May 2024 triangle, which we were following for much of its development.
The last reversal point low on the black triangle was the October 2024 and March 25th lows, which shows a double bottom reversal pattern, which isn’t unusual in big trading ranges. The first reversal point in the May 2024 triangle was strongly slanted double top, with the October low 2024 being a H&S bottom. The next rally stalled out with the formation of the double top reversal pattern at the top trendline at reversal point #3, which led to three more swings within the triangle creating the 4th, 5th and 6th reversal points, the final decline being the double bottom reversal pattern.
After the breakout from the black triangle, the double bottom trendline held support on the backtest from above, which then led to the rally that began the formation of the current blue rising wedge in October of 2024. Earlier this week, you can see the bottom rail of the blue rising wedge was touched, with the price action actually moving slightly below the bottom trendline during the day on Monday before reversing higher to close the week at the top trendline.
Most won’t view the blue rising wedge as a bullish rising wedge, but it has all the characteristics of one, as they tend to show up in a strong impulse move. Keep in mind the HUI and most of the other PM stock indexes have been consolidating for close to six months now. You can think of the blue rising wedge as a running correction, as it helps to reset the bullish sentiment. A negative divergence on the RSI usually takes place.
It’s possible we could see a small decline before the breakout, which is pretty normal with any consolidation pattern, or we could see a breakout gap tomorrow.
