The "call" I am probably most proud of – – and the one which has benefitted me the least! – – has been my loud and persistent declaration to short miners. In the face of an army of precious metals kooks and email-sending weirdos convinced that gold was heading to $5,000 per ounce, I stood by my miners bearishness, and it's obviously been screamingly correct.
But with miners on the mend, when do we go in for the kill? After all, my analog holds that the majority of the plunge remains in front of us.
To help answer this question, I present a very simplistic view of the first instance; we have the peak in green, the first drop in blue, and the bounce in magenta. It's the magenta figure we want to know for the present GDX.
Looking at the above, the high price at green was 56.19 and the low price at teal was 27.02, which is 48% of the peak value. It them bounced to 38.41, which is 68% of the green value.
Looking at the chart below, the green peak is 66.79, and we dropped down to 39.08, 58% of peak value. If the bounce matched the "68% of green value" prior incident, that implies a price of 45.65, which has already been exceeded.
However, if we take into account that the present drop wasn't as severe – – the market was about 20% stronger than the last time – – we get a target price of 54.88.
I think these percentages are helpful but crude guidelines, so I don't intend to use them as firm targets. Looking at the chart, what is clear to me is that a price of 51.80 or higher would damage the analog. I shorted GDX today with a relatively tight stop at 48.34 (just above the high of April 12).
My breathtakingly brilliant conclusion about where the price is going to peak is I Have No Idea. Given that we are within the crude target zone of 45.65 to 54.88, I am comfortable entering a small short and seeing how things pan out from here. If I get stopped out, I'll wait for a price closer to 51.80.
