In our October 29 ETF analysis, we said that precious metals ETFs, such as gold and silver, may soon be in play for potential trend reversal buy setup.

Market Vectors Gold Miners ETF ($GDX) has been in pullback mode since late August, but recently broke the downtrend line of the consolidation (October 22), before stalling out at the 50-day moving average.

Yesterday, $GDX sold off sharply in the afternoon, but immediately bounced back after finding support at the 20-day exponential moving average.

Such price action produced a bullish reversal candle on the daily chart, and possibly created a higher swing low IF yesterday's low is able to hold:



Yesterday's sharp intraday selloff and "undercut" of support shook out the "weak hands," which had the effect of absorbing overhead supply. In turn, this should now make it easier for $GDX to move higher in the near-term.

As such, we are stalking this ETF for potential momentum swing trade entry going into today's session. Regular subscribers of The Wagner Daily should note our exact buy trigger, stop, and target prices for this trade setup in the "Watchlist" section of today's report.

One quick note about this trade setup is that, unlike a vast majority of our buy setups, the 50-day moving average is well below the 200-day moving average (which is still in a clear downtrend).

This means $GDX is a counter-trend buy setup (this is a short-term trade with reduced share size/risk) that seeks to take advantage of a bullish trend reversal. On the ETF side, we occasionally take counter-trend trades in commodity-based ETFs.

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.