one way to play a short on the gold stocks is via DUST, the 3x leverage short gold miners etf. remember that these leveraged etfs, particularly the 3x leveraged plus those in volatile sectors like the mining stocks, are prone to considerable price decay over time. in my trading account, i often prefer to short the long verison (in this case, NUGT, the 3x long gold miners etf) to go short or short the short version (DUST) to go long the miners. if your timing is right, this can give you both the price move (times 3) plus the inherent decay that these leveraged etfs suffer over time. keep in mind that this decay is more pronounced during choppy (back and forth) trading periods vs. trending periods. also make sure to account for the leverage when determining position size, stops, and targets. although i can not give specific investment advice, i do believe that these leveraged etf’s, as well as leverage or the use of margin in general, should be used very judiciously, if at all, by anyone other than seasoned traders or investors. typically, these leveraged etf’s are used most effectively by active traders that plan to hold them for a short period of time (typically intraday to just a few days to maybe a few weeks, depending on the specific etf).
with that being said, here’s the daily chart of DUST, which is pretty much a mirror image of GDX. in this case, it is the RSI oversold readings (30 or lower) that have historically signaled fairly precise long-side entries. again, no patterns in technical analysis ever continue indefinitely so make sure to use stops commensurate with your risk tolerance and trading style. personally, i plan to give this trade a little room by allowing the miners to continue somewhat higher if the current momentum continues. i will post some ideal stops and targets soon.
note: as there are often various etf’s that track a specific index or sector, for simplicity i will tag those posts using the primary tracking index or most popular 1x long etf. e.g.- one can trade the SPX using SPY, SSO, SDS, SH, ES mini-futures, etc… however, any trade ideas using those charts will be tagged with the $SPX-SPY tag for reference. this NUGT post will be tagged with the GDX ticker symbol.