If you have been following my DUST Road Map articles (the last posted 4/24/13 and you can find it here seekingalpha.com/instablog/6143431-robert-edwards/1793131-dust-road-map-has-been-golden you would know that I was calling for DUST to stop dropping from the recent high of nearly 120, and looking for a bottom 70 to 80.
Right on schedule DUST stopped going down just under 76, which allowed me to get long and make a nice move to 92. Unfortunately my 95 to 105 target was not reached on the first try. The next rally attempt stopped at 94 and then after playing in the 80s we finally hit the 95 target yesterday. I played the first two pops but did not play the final one as I was getting ready to reverse and go the other way. Instead of buying NUGT, the triple long GDX ETF, and the direct opposite of DUST, I chose to sell 32 strike puts on Newmont Mining (NYSE:NEM) on Tuesday, 5/07/13 that expire this Friday. I also bought a few shares of NEM. Well, after one strong rally today, 5/08/13, I am now out of NEM and the puts I sold for 31 cents are virtually worthless. I am now calling for NEM to top out between 34 and 35 on Thursday and to then start another down move. If I am right, then DUST should again get some support towards the 75 to 76 area or slightly lower and should be a nice buy. I expect DUST to bottom and then move 20 to 30 dollars off the low over the next couple weeks. I will post updates in the comments section of this article so check back to see what is going on if you like.
Long-term I am very bullish gold stocks and feel they may be the best sector to be involved in during late 2013 and most of 2014. However, I do not feel that gold is through going down and we really need to trade under $1300 for gold to make a meaningful bottom in the $1225 to $1240 area. When the precious metal trades below $1300 is when I will stop playing DUST and will get serious about owning NEM and other gold stocks.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DUST over the next 72 hours.