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GDX NUGT Second Price Target Hit, Trade Update + Market Comments

I've studied the charts inside & out today, looking for something relevant to share but other than the fact that the broad markets followed through on yesterday's breakouts (which so far, helps to confirm yesterday's breakouts), I can't find anything that has changed in the technicals since the market update video that was posted last night. Essentially, the price action over the last two trading sessions was clearly bullish & certainly skews the near-term outlook to bullish until & unless the gains over the last two days are faded, which would need to occur soon.

For the time being, the longer-term outlook for the equity market remains bearish & while I believe the intermediate-term bearish case still trumps the bullish case, that argument will start to erode should the markets continue higher in the coming days & weeks. I've been very cautious & extra selective on new trade ideas recently but will do my best to pass along anything that I come across that looks compelling, either as official or unofficial trade ideas.

Despite continued strength in equities & even a green close on GDX today, GLD (gold ETF) has once again close red for the sixth consecutive trading session since breaking down below the large bearish rising wedge on the daily time frame. It is worth noting that GLD came within 32 cents of my 116.00 target (less than 3/10ths of 1%) & now has positive (bullish) divergence in place out to the 15-minute time frame.

GLD daily May 25th

GLD daily May 25th

It appears that the GDX/gold stock traders are anticipating a reversal in gold off or near that 116 level as the miners were able to mount a decent reversal after opening lower & falling about 2.28% before reversing & closing up 2.49% for the day although as impressive as that sounds, it was really no more than a typical daily trading range for GDX. After hitting T1 for a very quick 5.8% gain on May 19th (or 3x that for a NUGT short), going on to hit & slightly exceed T2 for a 9.5% gain (or 3x) today before immediately reversing, GDX closed just below the former T1 support, now resistance level of 23.23. For now I'm leaving T3 (21.52) as the final target for the official trade as I still believe there is a decent chance that GDX will hit that level before the current correction has fully run its course.

GDX 60-minute May 25th

GDX 60-minute May 25th

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May 25, 2016 7:28pm|Categories: Completed Trades - Short, Gold & Commodities|Tags: , |12 Comments

12 Comments

  1. GetItRiight May 25, 2016 7:53 pm at 7:53 pm

    Randy, I think you meant to say that GDX closed just below the former T1 support, now resistance, of 23.32.

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    • rsotc May 25, 2016 11:21 pm at 11:21 pm

      GIR- Yes, I meant the former T1 level (the actual S/R level at 23.23, not the 23.32 level which was the target set 9 cents above that level, adjusted for an optimal fill, should GDX have reversed just shy of that level). I corrected the typo in the commentary. Thx for pointing that out.

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      • Ruben May 26, 2016 9:18 am at 9:18 am

        Randy,
        looking at GDX – where do you see a good entry point for a short.
        Also UUP to the upside an entry point.
        Thank you

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        • rsotc May 26, 2016 9:33 am at 9:33 am

          robenruben – I’m not sure that I would be shorting GDX on a bounce or going long UUP at this point as the recent correction in GDX & especially in GLD, has already played out for the better part of the downside targets that I was calling for a few weeks ago around the time they topped. Ditto for the US dollar, where the bulk of the rally (if not all & then some) that I was calling for just before the dollar bottomed earlier this month has now played out (I had a price target at 24.74 on UUP which was hit on Tuesday).
          As such, although I’m leaning towards more downside in GDX in the coming days to weeks (with a likely bounce first), I am very open to the possibility that the correction could be over as GLD came very close to my minimum pullback target & the US dollar just hit my upside target so & is likely to pullback at the very least & may have topped.
          With that being said, if I see what looks like an objective entry on a GDX short, I’ll post it here in the trading room or on the front page. Best not to force any trades right now IMO as I’m being very selective on any new positions right now, long or short.

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          • charlie May 26, 2016 12:48 pm at 12:48 pm

            Randy- Since you deem that GDX will probably bounce before descending fairly much again,do you still feel comfortable holding AG as a short (with 11.80 stop) aiming for 8.76 as the target ?

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          • rsotc May 26, 2016 2:36 pm at 2:36 pm

            @charlie – Yes, very much so. I think AG still looks like one of the most attractive short ideas for the individual mining stocks. AG back-tested that steep rising wedge pattern earlier today & so far was rejected (moved lower) following the backtest.

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  2. dan123 May 26, 2016 7:29 am at 7:29 am

    thanks for the update it looks like ABX created a double with yesterday rally retesting the former support as resistance so i can definitely see GDX trading lower especially if ABX moves down to 13.42

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    • rsotc May 26, 2016 9:15 am at 9:15 am

      ABX looks to be headed to at least the 15.50 area but as with GDX, it won’t be a straight shot down as counter-trend bounces are a normal part of any corrective or primary trend. Because GDX & the individual miners have such large daily price swings, those counter-trend moves can be painful to sit through but assuming the GDX is headed down towards the 20.20 area or lower, any back & forth chop works in the favor of a NUGT short due to the decay. G-luck on your trades!

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  3. dan123 May 26, 2016 9:57 am at 9:57 am

    Totally agree, thanks

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  4. pangblood May 26, 2016 2:27 pm at 2:27 pm

    Great update Randy, The decay in DUST has eaten away most of my profits, even now at 22.9 ish GDX price, my DUST is barely positive, Really sucks to be in too early. Also FMSA just hit your second target, so that trade can be closed.

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    • rsotc May 26, 2016 3:25 pm at 3:25 pm

      @pangblood – If you have a margin account but are unable to short NUGT since your broker doesn’t have the shares available to short, then you’d be much better off just shorting GDX vs. buying DUST for a swing trade that is likely to last more than a day or so as they decay in NUGT & DUST is among the worst of any ETF, period.

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  5. pangblood May 26, 2016 4:06 pm at 4:06 pm

    @rsotc For that exact reason I’m massively reducing my position, thanks for letting me know that the decay in NUGT DUST are the worst, I can’t imagine how much decay profits shorting NUGT must have racked in

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