Divergence is a powerful indicator and something I’ve mentioned regularly here at Options Trading IQ. Recently we saw a text book example on GDX.
GDX had been hit really hard since July and was putting in a lower low. However, volume was less severe and RSI was not making a new low. This indicated that the strength of the decline was fading and the chances of a short-term bounce were high.
Sure enough, GDX put in a bottom at 17.28 and since rallied 6.83% in just a few days.
The rally may stall now, who knows, but this was a pretty nice bounce if you were able to catch it.
Trade safe!
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
