Paul Mosgovoy's  Instablog

Paul Mosgovoy
Send Message
Truth is timeless: “Markets never change” – Jesse Livermore, 1923 The early masters, Livermore, Wyckoff and Loeb isolated themselves from the crowd and crowd thinking. None of them ever graduated high-school and yet they each became legends in the market. Their techniques have been time-tested.... More
  • DUST: Reaching Escape Velocity 5 comments
    May 28, 2014 10:42 AM | about stocks: DUST

    Just what is "escape velocity"?

    There is the physics definition available on the Wikipedia; However, our own definition is that the Direxion Daily Gold Miner Bear 3X ETF (NYSEARCA:DUST) has reached a condition where it is not likely to come back down any time soon. In Wyckoff terms it is on the "spring-board".

    If we look at the weekly chart of the Market Vectors Daily Gold Miner ETF (NYSEARCA:GDX) we can see that the GDX is literally falling off a cliff.

    (click to enlarge)GDX Weekly Chart

    Chart by TeleChart

    Of course, the price action could arrest itself in some way and begin to head higher; After so much time congesting and building a down-side target, that event (moving higher from here) looks to be unlikely.

    If there is one possible scenario for a move higher in the GDX, it may be to come back to test the break of the 23.30 - 23.40 area.

    There is some amount if support in the 21.30 - 21.50 area for GDX. If it decides to bounce and attempt a test of the down-side breakout, it may be another opportunity to position short.

    Disclosure: I am long DUST.

    Stocks: DUST
Back To Paul Mosgovoy's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (5)
Track new comments
  • Ihavenoclue51
    , contributor
    Comments (9) | Send Message
     
    Paul
    Agree with your analysis except that DUST is overbought now based on the Daily RSI and Stochastics. Also coming up on a downward sloping 200 MA. I know you're in for a longer term trade (as am I) but would appreciate your thoughts?
    Thanks,
    John
    28 May 2014, 11:27 AM Reply Like
  • Paul Mosgovoy
    , contributor
    Comments (119) | Send Message
     
    Author’s reply » I appreciate the question,

     

    I have not looked at the RSI or the 200 SMA to see what is there. It is a matter of preference to use indicators and for my published analysis, I prefer to not use any.

     

    On my own private charts, yes I do have MACD and Stochastics at the bottom of the chart in a separate pane. However, I rarely use them to make a determination. I have them there to help support or negate probabilities.

     

    Since my firm's objective is to emulate the techniques of Livermore, Wyckoff and Loeb........all market legends, we use the techniques that they developed.

     

    If you have any of their books, you may notice something missing..........there is not one indicator in their writings........not one. :-)

     

    They relied on price-bar and volume or the "tape" as they called it.

     

    It is a difficult transition. A very naked feeling and a stretch to focus on what is really happening.

     

    With that in mind, DUST may retreat to test the breakout.

     

    From the price/volume bars thus far, I do not see that as yet.

     

    IF (a big IF) today was a high-volume day in GDX with little progress lower, then it may indeed move higher to test the underside of its breakout. Thus far, volume is muted and it continues lower.

     

    So, I need to maintain the position until the chart says to exit. For now, it may hesitate at the 200 SMA as others are watching that level but it might be a short-lived hesitation.

     

    I would rather stay positioned long in DUST during that event and not try to get back in or attempt to figure out if the congestion was over.

     

    It was hard enough to get positioned in DUST, I do not want to have to go through the exercise again if it is not needed.

     

    Thanks again for your input,

     

    Paul
    28 May 2014, 11:50 AM Reply Like
  • Ihavenoclue51
    , contributor
    Comments (9) | Send Message
     
    I agree that it was difficult to get positioned on this. DUST/NUGT moved almost nowhere for over a month and I was back and forth several times looking for a breakout. I'm not advocating indicators only, though right now is a difficult case for being long in my mind considering MA's, RSI, stochastics, and BB's. Adding all these up, I think there will be a better opportunity in a few days when this lets up a little steam. Have sold half of my position for a 25% gain and will try to find another buyer here today.

     

    While I have you for a second, was wondering your thoughts on DUST versus JDST. I've been playing JDST for the larger swings but am noticing its not moving as much relative to DUST as it has been. My thought on this is that the junior's are developing a little takeover premium that could prove substantial when some of the first acquisitions are announced. Any thoughts on this?

     

    Thanks,
    John
    28 May 2014, 12:02 PM Reply Like
  • Paul Mosgovoy
    , contributor
    Comments (119) | Send Message
     
    Author’s reply » John,

     

    I too have noticed that JDST has lost some of its volatility.

     

    You may be right about a 'premium'. For the junior sector I see that prices are fairly well washed out (at least for the US listed equities). It may continue to drift lower (JNUG) but it looks like the down-side action for now is in the seniors.

     

    Mark Bristow (CEO of Randgold) said in an interview a few days back (maybe you watched it) that the gold mining community has corporate structural problems.

     

    I take that to mean that the big miners still have a ways to go before they are forced to fix their business models and maybe have another round of asset write-downs...... especially if gold continues lower and winds up below $1,200. At a current level of $1,258, it is not too far away from that now.

     

    With the seniors in such a bad way, they may put off acquisition activity. The built-in premium might begin to fade if that is the case.

     

    It will be interesting to watch how JDST responds if the gold price continues to move lower and acquisition talk begins to dry up

     

    Thank you for your questions,

     

    Paul
    29 May 2014, 12:38 AM Reply Like
  • Ihavenoclue51
    , contributor
    Comments (9) | Send Message
     
    Great discussion. Thanks.
    29 May 2014, 09:35 AM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.