It can be difficult to find any favorable trends in a stock market like the one that has started off 2016, but one technical indicator is signaling the beginning of a new uptrend for gold mining stocks.
Trader Welles Wilder published his Average Directional Index (ADX), as well as its complementary Plus/Minus Directional Indicator (+/-DI) metrics back in 1978. Calculating ADX is a somewhat complicated five-step process that involves several smoothing measures, but traders typically use ADX and DI to determine trend strength and trend direction. A new trend is formed when the ADX crosses above 20, and Wilder has suggested that an ADX above 25 is a strong trend. In terms of direction, an uptrend is indicated by +DI above –DI.
According to ADX each of the following three gold miners may have just started new uptrends.
Agnico Eagle Mines Ltd (USA) AEM
Agnico Eagle’s ADX just crossed above 20, and its +DI is well above its –DI, indicating the new trend should be higher.
AngloGold Ashanti Limited (ADR) AU
Traders are hoping that the new ADX uptrend will carry this gold miner back to its 52-week high near $13.
Sibanye Gold Ltd (ADR) SBGL
Sibanye may be the most promising potential trade of the three gold miners. Not only does its ADX of 21.1 indicate that its trend is the strongest of the three, its ADX also has the most upward momentum in the near term.
Disclosure: The author holds no position in the stocks mentioned.
Image Credit: Public DomainEdge Rankings
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