Early last week I discussed the idea that it was possible the gold miners would make a lower low, which would flush a lot of traders out of the market. Gold and silver were hit pretty hard on the COMEX late last week, which caused a steep sell-off in mining shares, pushing the mining index below the 300 level that I had outlined on the chart below.
Despite the sell-off, Friday featured a pretty sharp reversal at the end of the day, which may or may not have marked the bottom of this correction. My feeling is that if Friday was not the low, then we are very close to one.
In terms of the quick trade set-ups that I had labeled "buy" at the beginning of last week, some of those were pushed below their suggested stop loss area, while others held up pretty well. The key this week for traders will be to look for a reversal and follow through and then re-buy some of the names that were stopped out or add to positions that held up through the correction.
Another notable development in the market is that the energy sector has really started to rally, which is not surprising given the brutality of the current bear market. I have added several energy names to the quick trade list (along with some non energy names). Like the marijuana sector, it remains to be seen whether we are going to move back into a bull market or whether this is just an oversold bounce. Because these sectors are both in long-term bear markets, I typically keep the quick-trades on a shorter leash.
The other challenge with energy companies is that many of them moved 30-50% in just a couple of days, which makes it difficult to buy them here from a risk management perspective. I have added only names that appear in the earlier stages of breaking out. Traders could also consider waiting for a small pull-back early this week and hope for a better entry.
Have a great week!