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June 25, 2009 / Jeb

Bullish on Gold Mining Stocks! Profitable Trade Ahead.

GDX

On June 3rd I warned not to buy any gold stocks as it was overbought and needed to shake out weak hands.  GDX corrected to the 50 day moving average and did a classic one day fakeout below the 50 day moving average.  The 50 day moving average is an area of support the mutual funds and institutions look at to add to their positions.

There are times where a stock breaks through the 50 day for 1 -3 days in order to shake out weak holders.  This is what appeared to happen with GDX and many individual gold mining stocks.

GDX is a buy at this point.

Notice it broke out of the bull flag.  It has also reached the oversold levels which is able to catapult it to approach new highs.

The one negative is volume has not come in yet.  Volume needs to confirm this move.  I believe volume will come in to confirm this move.

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