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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
  • Timely Thoughts On The Gold Miner ETFs: GDX, NUGT, JNUG & DUST 7 comments
    Jun 10, 2014 3:53 PM | about stocks: GDX, NUGT, JNUG, DUST, JDST

    (click to enlarge)

    Gold Miners (NYSEARCA:GDX) Could Hit A Short Term High On Wednesday, June 11, 2014.

    The above daily chart of the gold mining stock ETF (GDX) is only updated through Monday, June 9, 2014. It does not show today's pop up in the miners because the stockcharts.com servers are not updating today (site where I got the chart). You will see that 10 day rallies occurred 4 times on the way up from the December 2013 bottom, to the March high. Since we topped out, we have had two small 10 day rallies and GDX sold off beginning the 11th day. The reason I bring this up, is that the above chart now shows 8 days of movement off the recent bottom, with prices shown through Monday, June 9th. Today is the 9th trading day and GDX is up right now about 39 cents, just an hour before the close, at $22.93. Tomorrow, Wednesday June 11th, will be the 10th up day of the current move off the bottom and could mark a short-term top in GDX as well as the leveraged mining ETFs of NUGT and JNUG. It may be time to at least consider taking profits if one is able to, on up to half of your position, or selling some mining shares in anticipation of buying back lower in a few days. The 10 day rally cycle has been quite consistent over the past 6 months. There is no reason to believe that this time will be any different. Definitely it is something to watch.

    There is still one day to register further gains on this 10-day rally phase, but it is discouraging that GDX has only been able to rally just under $1 off the $22.00 low area. The late April rally had a magnitude of nearly $1.75, and the 10-day rally just before that one, was for $2.00.

    (click to enlarge)

    NUGT Needs To Retest The Bottom Before Moving Up For Good

    The above chart on the triple leveraged bullish gold mining ETF (NYSEARCA:NUGT) is again only current through yesterday, so it does not show today's rally to $30.80. I would like you to focus on the previous major bottom in NUGT that occurred in December 2013. NUGT bottomed on December 3rd at $25.42, but then popped in 5 days to a high of $31.44. But 2 days later, a new low was struck at $24.71. This was followed 4 days later with a rally to $29.08 and then a new low the next day at $24.14. Then 4 days later NUGT rallied to $28.68 before one final retest down at $25.25, when NUGT bottomed for good. This whole process took 19 days of trading. Since we are only up 9 days out of the bottom in the current rally phase off the lows, one would expect at least one if not two or three retests of the lows, before NUGT bottoms for good.

    (click to enlarge)

    JNUG Could Stop Very Short-Term In The $18s

    It is most unfortunate that the server at Stockcharts.com was not updating and the above chart does not show today's nice 9% rally to $17.84 in the triple leveraged Junior gold miner ETF (NYSEARCA:JNUG). Just like NUGT, I expect JNUG to have to retest the bottom before moving up for good, and so it is likely going to top out temporarily in the $18s on Wednesday, June 10th. If one wants to stay put in their positions in NUGT and/or JNUG and not try to time the retest move back towards the lows, one might want to buy some shares of the triple leveraged bearish gold mining ETF (NYSEARCA:DUST). Here is the daily chart of DUST through Monday, June 9th:

    (click to enlarge)

    DUST May Be A Short-Term Buy For A Scalp At $26 & Below

    The above chart does not show the $1.80 of weakness down to $26.35 that DUST is trading at near today's close. You can see on the above chart that just 2 1/2 weeks ago, DUST left a gap from $25.72 to $26.79. You should know that markets like to fill gaps. Today DUST partially filled the gap. If DUST would continue lower on Wednesday, it might be worth buying from $26 down to the bottom of the gap at $25.72. This gap could be filled tomorrow and then DUST should turn higher as the other miners start their retest of the lows.

    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.

    Stocks: GDX, NUGT, JNUG, DUST, JDST
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Comments (7)
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  • glaserdx
    , contributor
    Comments (194) | Send Message
     
    Thanks for the update Rob. I really like your use of the counts as they provide a solid empirical base hard to argue with.
    10 Jun, 06:56 PM Reply Like
  • random 4
    , contributor
    Comments (15) | Send Message
     
    In agreement again. I have a short position and plan to scale in as appropriate.
    Just a comment on another website that you occasionally refer to (American Bulls). It is interesting to note that candlestick patterns reveal a BUY on GDX, a sell on NUGT and a hold on DUST? This obviously makes no logical sense. How do you resolve an interpretation that involves multiple factors? Which one is correct?
    Concerning our previous discussion on the sp500 and (occasional) gold inverse correlation; it appears that the sp500 will go down in the near term (note decreasing volume), however the daily count for GDX (as you note) and my measurements agree with you that GDX should also go down. We have a similar dilemma in interpretation.
    Do you rate your factors and which factors do you find most important in market direction interpretation?
    11 Jun, 02:34 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » Because NUGT is leveraged and has slippage, it probably underperformed GDX so GDX was able to rally enough to get a buy signal but NUGT was not. DUST is leveraged and also has slippage but if NUGT is on a sell signal, the inverse DUST should be on a buy signal, one would think. In looking at AmericanBulls.com closely, I have seen many times where they were somewhat subjective in recognizing the criteria has been met to change signals and not completely consistent.

     

    Now, there are often conflicting signals but one must give more or less weight to some signals over others, and then trade accordingly. What I do is to not be dogmatic. I expect the miners to top out today, 6/11/14, but I wait for confirmation before I buy or sell in size.

     

    I cannot say what factors I use to determine what is most important hypothetically. I can only say within the context of the actual situation. I believe trading is equal parts art and science. Trading skill (gained from having been through many a bloody battle in the past) can trump prognostication. Although I am a die-hard technician putting nearly 100% faith in the charts, and nearly zero percent on fundamentals, and I always work from a roadmap, if something strange pops up in the road, I have high confidence that I can react quickly enough, taking evasive action and swerve and slow down, to avoid a crash. My ultimate success relies on my evasive driving skills to keep out of trouble. I strive to be right as much as 75 to 85% of the time, but with money management and other techniques, I expect to be a winner if I am only right 50% or maybe as low as 30% correct.
    11 Jun, 09:06 AM Reply Like
  • random 4
    , contributor
    Comments (15) | Send Message
     
    Thanks, my swerving skills aren't quite working recently. Again, I am just lucky that I have some winnings to lose.....
    12 Jun, 12:29 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » This is day 11 and we are still booming in GDX but the last 2 rallies in GDX was $1.75 & $2 so at $24 then GDX is up $2 on this rally and should be topping out shortly, one would expect. Gold and miners are notorious for running farther than u expect up or down so hard to call turn.
    12 Jun, 04:02 PM Reply Like
  • random 4
    , contributor
    Comments (15) | Send Message
     
    How did you handle this rally? I am still short and losing substantially. My system has an automatic "8 days and out" rule which means I start the beginning of lowering my short position today. The unfortunate thing is that I am fully aware of the evacuation etc.. procedures in Iraq. Didn't help me. I try not to swerve from the technical system, but yesterday is the classic "trendline breakout on volume scenario"....worrisome for shorters.
    20 Jun, 07:17 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » I saw a bullish signal on the day we bounced off of the lows and stayed above 1270 in August gold the remainder of the day. Then on Thursday the taper announcement had a small dip and in 2 minutes we were higher and stayed up rest of the day. Very bullish action both times and I was planning a rally to 1275 to 1280 post taper and it occurred. I was hoping for a bigger selloff though to take off my shorts (I went flat thru the report). Well, during the night I bought 1278 and again on breakout of 1285 but got out of extra gold in the 1295 to 1298 area to be balanced again long and short. But on pop above 1300 I went long again and am more long than short now, expecting strength late today (Friday) expecting bears to panic and buy as they won't want to be short over the weekend with possible bombing in Iraq by U.S. etc. After the report I recommended all to be 60% long NUGT and 40% short using DUST and I have not wavered on that, still feeling that for one week we will stay strong. They will keep gold up to force margin call people to get out at a loss and not fall back and let them trade their way out. Lots of experience with these types of situations and I am making money but not as positioned long as strong as I would have liked.
    20 Jun, 09:00 AM Reply Like
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