How to Play a Late-Summer Miner Rally
Greg Guenthner

After opening higher Thursday morning, stocks leaked lower all day. The S&P 500 continues to slip from its July highs. As of this morning, the big index is trading at levels not seen since late May.

I know you’re probably sick of all the market correction talk that’s popping up everywhere this month…

How far will the market fall?

When will stocks catch a bid?

Is this the beginning of a huge crash?

Forget all of it. Let’s leave the correction speculation aside today and focus on some stocks that are actually posting gains…

I’m talking about gold miners.

The miners have been quite the volatile snap-back play this year. After sprinting ahead of the pack during the first quarter, gold mining stocks almost gave it all back before once again jumping out in front of the market back in June. This week, the miners are consolidating near their 2014 highs as gold futures sneak back above $1,300…

Remember, gold miners have been on the market’s “most hated” list for nearly two years. And earlier this year, they attempted to shed their oversold levels and enter a new bull market. The move has been incredibly volatile so far. But if miners can break to new highs within the next few weeks, I think we could finally see the move stick.

You’ve also probably noticed that precious metals have put in some strong performances recently. Palladium (one of my favorites) looks like it’s headed back to its highs after consolidating. Silver is trying its best to hang on to $20, while gold is back above $1,300 this month. While I don’t see any strong opportunities in gold (the metal), gold mining stocks are setting up for another potential run.

Pay close attention to these stocks and you’ll have a shot to hop on a winning sector-even if the market continues to sink this month…

If you’re looking to nail down a short-term trade with the Market Vectors Gold Miners ETF (NYSE:GDX), you should look for a breakout above the March highs near $28. The chart’s not perfect, but you can see we have a higher low in late May-early June and some flirting with a breakout area (highlighted in yellow):

Also, I think it’s important to point out that a note from a reader that I responded to in early June perfectly called the early summer bottom in the miners. “Do you believe that GDXJ [Market Vectors Junior Miners ETF] has completed its summer low?” read the note.

Even though I told this reader not to get ahead of himself (I didn’t see a tradable move at the time), he nailed the bottom in these stocks to the week. That’s no easy task…

There are other ways you can trade the miners if GDX doesn’t do it for you.

If you’re interested in playing smaller mining stocks, there is the Market Vectors Junior Gold Miners ETF (NYSE:GDXJ). It’s riskier than GDX-but more explosive since it contains some very small companies. GDXJ is up about 36% so far this year, while GDX is up 26%.

Greg Guenthner

dailyresourcehunter.com