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Trade 1 - DUST, June 19-20

Summary

My reasoning for placing this particular trade

Honest self-reflection as an exercise for future improvement

DUST Intra-day Analysis

DUST Trade, June 19th, 2017

Bought 85 shares of DUST at 3:52 PM (Eastern Time) at $31.72 per share for a total of $2,702.98.


WHY?

Mostly because of technical and investor trend/behavior reasons: GLD dipped below its MA(50) on both weekly and daily charts.

GLD showed little strength as it fell under the pivot support points, and closed with further weakness.

DUST, on the other hand, showed strength and pushed higher throughout day, passed its daily MA(50), and resistance level

The reason for being bearish on gold comes from the lack of inflationary data, as well as the lack of substantial economic and earnings data coming out this week. Gold was up prior to FOMC on June 16 th, with a rate hike is widely expected. So, why was gold up? I think it’s because of people anticipating a jump in gold, which is what happened the prior FOMC meeting on 03/15. Gold jumped in March because there were inflationary pressures, gold was below MA(50), and has lost a substantial amount of value. Investors also weren’t 100% sure that Fed will hike, now they have more credibility, and as long as inflation data doesn’t persist, gold should continue to push lower as markets push higher.

GLD doesn’t seem to have any significant correlation to the market ($SPX), however, as market pushes higher, people have less need to invest in a safe haven stock. As long as no economic data comes out to suggest inflation or bad economic conditions (i.e. low productivity & growth). Political tensions such as Trump policies, North Korea, etc. are likely to boost gold price, but they are hard to foresee and tend to favor the trend, so until gold is oversold, they wouldn’t result in a huge spike.

When to get out?

DUST is a relatively short-term position, not suitable for long-term holdings. Therefore, I will play it based on technicals. I will hold it until GLD is about at $117 level, or if DUST breaks support & falls below $29.85. I will cut losses at $29.75; Max loss of  -$174.20. If DUST goes to prior high levels of $35.50, it’ll be a +$314.52 profit.

Results:

A small profit of about $25, or +0.92% from the trade in a day. The thinking was right, there were no large moves up in gold, it simply hit bottom and recovered. My biggest mistake was getting out at the wrong time. It opened up 20 th, a little higher, went up to +3% or about $80, and I dipped out when I thought it wouldn’t hold uptrend pattern. Which is good because it fell harder the next 2 days. Once again the key lesson is to rely less on technicals and more on long-term logic.