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Robert Edwards
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Contrarian daytrading technician who specializes in locating high probability short term trades while predicting price movement directions with over 85% accuracy. Most of my trading involves either extremely short term micro scalping of stocks or commodities (using 1 minute bar charts), or swing... More
  • Gold/GDX/NUGT/JNUG Turned Down On A Dime.....They Can Turn Back Up The Same Way! 16 comments
    Mar 24, 2014 3:48 PM | about stocks: NUGT, GDX, DUST

    Although we got a pop in the US Dollar after the Yellen speech and Fed taper recently, the US Dollar really just moved back towards the middle of its trading range. Check out this article from Kira Brecht at Kitco that has a great US Dollar chart, click here. She concludes that gold is not moving based on the US Dollar and I agree. She also explains that crude oil prices, a good indicator of inflation, are strong, and supportive of gold. She suggests shrugging off the recent selloff in gold and to look for the bull trend to continue. I agree whole-heartedly.

    If you have been reading my posts recently, you know that I am long NUGT and looking for a rally back to $26 in GDX that translates to $47 in NUGT. Well, on Friday we just came a bit shy of reaching the $26 GDX target (we topped at $25.94). Gold had bottomed at $1320 and had bounced off the lows over $20 and looked like it was holding support. That all changed today however. Gold broke under support at $1330, $1317 and even $1310. It has some support $1307 to $1308.50 and again at $1300 that should offer some support in the near future. The 200 day moving average in gold is at $1302. Also there is major support at $1275 to $1285. Somewhere in here gold should hold support and retest resistance at $1350. So GDX should likewise bottom shortly as well. Lets take a look at the GDX daily chart:

    (click to enlarge)

    After bottoming at $20, we have rallied recently to a high of $28.00. A 50% correction of that entire move would bring us back to $24.00, not far from today's low of $24.29. If we get a Fibonacci retracement of 61.8%, GDX could retrace back towards major support at $23. But whether GDX stops at $24.29, $24.00, or at $23.00, I am looking for a significant rally back towards recent highs, and quite possibly new highs. If you look at the GDX daily chart shown above, you will notice that the gold mining ETF made a significant bottom at $22 in late June 2013. From there, GDX rallied to the same $28 area where resistance stopped the rally recently. Back in July 2013, the rally from $22 to $28 was accomplished in less than 4 weeks. This time around, it took 12 weeks to rally from $20 to that same $28 target in GDX. Back in July 2013, once the $28 target was achieved, GDX corrected to a low of $23.67, and from there GDX quickly exploded back up above $30 and ultimately $31. So holders of the leveraged bearish gold mining ETFS (DUST & JDST) should not get too complacent. GDX has fallen hard and fast off the $28 resistance like it did last summer. However, back in July 2013, we rallied just as quickly back to the old highs and then continued on to new highs. Do not be surprised if a similar thing happens again.

    I remember last December when no one had anything good to say about gold, and they outright hated and despised the miners. A couple weeks ago it had totally changed and everyone loved the miners. In less than 2 weeks, the sentiment has changed again and the bears have come back in force. The media is now getting flooded with negative messages about gold and the miners. That is not by accident. Funds were long into the $28 resistance area, and now they have for the most part already taken their profits or are positioned short. They want to cause the gold mining stocks to get as cheap as they can so they can buy low. When we fall enough, hopefully somewhere between $24.29 and $23 in GDX, we should turn higher quickly and retake my initial target of $26, and then retest the high of $28. Do not be surprised if we happen to keep on going up towards $30 or $31 before we get the next significant correction down.

    For the leveraged bullish gold mining ETF (NYSEARCA:NUGT) and leveraged bullish Junior mining ETF (NYSEARCA:JNUG) holders, I won't bother to provide charts as you can base everything off of GDX. You should be able to calculate where NUGT and JNUG will go based on GDX. For instance, if GDX drops to $24, NUGT could fall to $36.75, JNUG could fall to about $20.50. If GDX falls another dollar to $23, a further drop of 4%, then the leveraged ETFs could fall at least 12% more, or to $32 in NUGT and $18 in JNUG. Hopefully we will stop well before hitting these lower levels. If we then rally to $26 in GDX, that is $47 in NUGT, and about $30.50 in JNUG. They are obliterating the Junior miners today so JNUG is a better buy than NUGT going forward. JNUG has fallen more so it should get the bigger bounce when we do rally.

    Disclaimer:

    The thoughts and opinions in this article, along with all stock talk posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.

    Disclosure: I am long NUGT.

    Stocks: NUGT, GDX, DUST
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Comments (16)
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  • Growfast
    , contributor
    Comments (273) | Send Message
     
    I'm on board. Holding now just a risk hedge position on the short side, but long GDXJ calls, JNUG and JNUG calls. Ready for the big rally.
    24 Mar, 04:13 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » Gold has fallen 6% from the highs from 1392 to 1308 area. If GDX had fallen a similar percentage from $28 high, GDX would be trading at $26.32. Yet GDX has fallen to a low today of $24.29, an extra 7%.

     

    But looking at it in a more realistic way:

     

    Gold rallied $210 from $1182 to $1392. It has given back $84 or 40%. Miners have rallied from $20 to $28 so a 40% giveback would be $24.80 which was my low target that I thought would hold and keep NUGT above $41. GDX is about 2% weaker and NUGT about 6% weaker than it should be right now.
    24 Mar, 04:32 PM Reply Like
  • Tradestrong
    , contributor
    Comments (22) | Send Message
     
    a measured move in JDST could test 28-30. which JNUG would likely to bounce here at 20. Robert. 1300 as a strong support. ;) agreed with the analysis Robert. if you take a look at the weekly chart for miners and gold. it's extremely bearish. hum..
    thank you for providing us a guideline.
    24 Mar, 04:28 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » GDX apparently did not get the memo, that there was a golden cross scored last week in the miners. The 50 day moving average crossed over the 200 day average. When that occurs one is supposed to be buying. Maybe things will improve soon.
    24 Mar, 04:57 PM Reply Like
  • Growfast
    , contributor
    Comments (273) | Send Message
     
    Gold may not have gotten the memo, but it has its own Golden cross coming up here very soon. Only $8.58 separates after close today from the 50 day crossing over the 200 day MA.
    24 Mar, 05:35 PM Reply Like
  • Growfast
    , contributor
    Comments (273) | Send Message
     
    Correction to my post. The Golden Cross in Gold happened today. I was reading the closing number versus where 50 day and 200 day MA have now met each other.
    24 Mar, 05:56 PM Reply Like
  • Tradestrong
    , contributor
    Comments (22) | Send Message
     
    Robert. do you have an Email. i want to send your few charts to view. i think we are likely to heading lower. but yeah, bounce is for sure.
    24 Mar, 05:58 PM Reply Like
  • Growfast
    , contributor
    Comments (273) | Send Message
     
    Tradestrong, you can send Robert a message through SA by mousing over his name above, then click Send message.
    24 Mar, 06:12 PM Reply Like
  • John Tiwari
    , contributor
    Comments (8) | Send Message
     
    A Golden Cross occurred with DUST on Jan. 10/2014 (on a heavy sell-off day, closing below both the 50D and 200D) and DUST plunged after that. It looks like the Golden Cross occurred with GDX today with a similar heavy sell-off, closing below both the 50D and 200D - will GDX/ NUGT experience the same fate ?
    25 Mar, 02:24 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » Golden crosses as well as death crosses are very unpredictable as indicators. They tell you in the case of the golden cross, that you have been in an uptrend for some time and by the time it occurs, it may be time to go the other way. What matters more is the level one is trading at when the cross occurs. The lower one is priced when the golden cross occurs, the better. Higher is better for the death cross to work.
    25 Mar, 05:09 AM Reply Like
  • almoni
    , contributor
    Comments (59) | Send Message
     
    yes sir - i am agree and still waiting at gdx etf on 23 $ or even lower /
    move to 2 bottom figure /- than strong buy gdx till 28usd profit level
    25 Mar, 12:51 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » Agreed. If $24 does not hold as support in GDX, we could trade down to $23. If $23 does not hold as support. I see the possibility of a correction further to a low of $22 in GDX. I do not under any circumstances see a move lower than $22 in GDX. Should that occur, NUGT could be trading as low as $27. Then on a rally back to $31 in GDX, NUGT would pop to $60. If GDX bottoms at a price higher than $24, then the next top in NUGT should exceed $60. I anticipate $24 holding as support but I felt $24.80 would hold support and NUGT would stop falling at $41 and I was wrong on that one.
    25 Mar, 01:04 PM Reply Like
  • almoni
    , contributor
    Comments (59) | Send Message
     
    gdx and gdxj is good choice IMHO.
    that's enough for me
    25 Mar, 01:13 PM Reply Like
  • almoni
    , contributor
    Comments (59) | Send Message
     
    I have nothing against leverage but by myself I don't love etf 200% of 300% \ nugt \ and don't use it . to me sufficed AGQ ,,,at all
    25 Mar, 01:10 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » I agree that there is no reason to play with the leverage. However, since many are playing the leveraged trades and they could use some support, I have ventured into the cesspool of leveraged ETFs to try and keep them and myself afloat. I like the challenge. I want to see if one can play the triple ETFs and not drown. However, for most investors, GDX and GDXJ works just fine and gives one more staying power in severe downturns. The optimum time to play the 3X ETFs is after a big smackdown and things have settled down and we start moving back up. At that point one has a nearby support area to place a stop at.

     

    Thanks for the reminder almoni to use extreme caution when playing the 3X ETFs. That is also why I scale buy, scalp to lower average price, I try to balance with the opposite ETF, etc.
    25 Mar, 01:21 PM Reply Like
  • almoni
    , contributor
    Comments (59) | Send Message
     
    300% etf are similar to driving.
    if at a speed of 60 km \hour is pleasant -that
    on 180 km \h speed - the pampers are urgently necessary to me...
    25 Mar, 01:45 PM Reply Like
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