GDX / NUGT Update

If I were the type of person who didn't have a lot of time to dedicate to watching over the market and had the risk management skills or risk tolerance to sit on a position as an investment knowing there are going to be weeks of drawdown and weeks of the position working in my favor, but had a general overall sense that this was a good investment that I could manage to sit through without getting too worked up about drawdown periods which are always going to happen in any longer term trade/investment, than I might buy GDX right here or phase in to the position, maybe 1/3rd or half here and add another 1/3rd or half on a pullback and then just let it sit and do it's thing.

For a swing or even trend trade, I'd want just a little more on the short term confirmation side before entering, but if my time horizon for the trade was a month or longer, I think an entry or a phased in entry to something like GDX right here, maybe leaving a little room in my risk management to add to it on a pullback, then I probably wouldn't have a problem with GDX right now.

If I'm trading any leverage such as NUGT or GDX calls, then I really want precise timing and I'd be patient for a little while longer, I'm thinking maybe days as today is Thursday and we have op-ex Friday tomorrow, so maybe sometime early next week. Of course the market is our guide and this is all based on what we can see right now, we know that these can move very quickly, Gold was slammed pre-market to 10 week lows and then recovered to the high of the regular hours trading week all within 90 mins from the lows to the week's highs.

***One thing that you aren't going to see in this post, but is very important to GDX/NUGT positions is the revised GLD/Gold target for the base, I'll try to get that out in a subsequent post, but the target for GLD's pullback/basing area being higher than it previously was also means that GDX is likely at its base and doesn't have a pullback to a deeper base over a longer period (even though I thought that GDX was close to its base when the original deeper GLD pullback was issued), pay attention to the GDX/GLD correlation chart below.

 This is GDX (green) vs SPY (red), there's not a really tight correlation, but it seems on bounces or pullbacks there's more of an inverse correlation whereas on longer trends there often tends to be the opposite 1:1 correlation (although pretty far from actual 1:1), thus if we expect some noise in the market, I expect some noise in GDX/NUGT and that's why I didn't enter NUGT when I posted GDX Update Tuesday, April 22nd, plus the post was a bit broader in nature.

 This is GLD in green and GDX in red, you can see a much tighter correlation whether inverse or not, thus what happens with the GLD expected base area which was initially around $114 and now I believe should be revised higher to the area we are in now, around $123, makes a big difference for GDX's overall trend and how it is traded from here.

This is a 4 hour chart to show the highest probability underlying trend, we have a base around $20.50 in GDX from December or so, a pullback from the mid-March highs and a strong leading positive divegrence in to that pullback suggesting that GDX isn't going to make a deep correction as initially thought re: GLD, the correlation between the two has obvious implications for GDX to resume its uptrend rather than pullback to a deeper base which also changes the trend classification which could soon be an intermediate uptrend, above $31 area it could be moving to a primary bull market.

 This is the 60 min chart showing the negative divergence at the mid-March highs and subsequent pullback with accumulation of lower prices, these are the kinds of pullbacks we want to buy, IT'S THE TRADE COMING TO US ON OUT TERMS WITH A MUCH BETTER ENTRY AND MUCH LOWER RISK.

You can even see a double bottom with what looks to be a head fake move at the 21st of April, there's also a head fake move at the mid-March highs as resistance is broken in to distribution/negative divegrence suckering in longs and then trapping them.

 The 30 min chart is a shorter timeframe and shorter timeframes will have more detail. Again, the double bottom with a confirmed head fake move already in place puts GDX at a pretty interesting area for a long position on a longer duration trade.

The increased accumulation/leading positive divegrence is typical of a second bottom especially with a head fake move as that's where a lot of shares are accumulated on the cheap in large supply as stops are hit creating supply at lower prices.

 Just for confirmation, this is the 30 min chart of NUGT, it's almost exactly the same and provides excellent confirmation.

This is the 30 min chart of the 3x leveraged inverse of GDX or inverse of NUGT, DUST, it also is providing excellent confirmation via negative divergences at a double top with a current leading negative divergence.

 This is NUGT's 15 min chart, the same base area and the same leading positive divergence at the head fake move.

This is a 10 min chart of GDX, it of course will have much more detail and less trend.

What we see here is the process of creating a bottom, accumulation at the lows and when prices get too far away from the accumulation area some shares are fed out to knock prices back down to the accumulation area, the fact that the negative is only on the 10 min and not 15 min chart tells you it's not heavy distribution, it's more "steering" distribution to bring price back to the target range.

 The 5 min chart shows the recent shorter term accumulation at #1 and yesterday a few of you contacted me via email with NUGT longs, I mentioned I'd probably take the gain as it looked like a pullback was brewing late afternoon yesterday at #2.

We see the same thing on the 2 min chart, but with a little leading negative divergence.

And the 3 min chart just kind of sitting there.

What I'm looking for from here is a clear indication on 1-5 min charts that we have short term accumulation showing GDX/NUGT are getting ready to make the next leg up as this is starting to look like it's going to trend.

I'm even considering taking on a partial position, although I hate to use leverage in a choppy environment. Of course if I do open any new positions you'll hear about it before it's done even in the tracking portfolios.