GDX / NUGT Position Update

Las Friday I posted GDX / NUGT Update in which we looked at some different aspects of GDX/NUGT/gold miners including a larger cup and handle base, the head fake moves above and what I'm confident is another below a range, where positive divergences have been piling up in both GDX and NUGT.

In Friday's post, since the reversal process was getting to a pretty mature point, I had said the following...

"Usually there would be some sort of head fake move on a reversal pattern like this just before the actual reversal, if for nothing else, the bear trap it creates causes stronger upside momentum when the breakout comes."

I posted this chart with the following commentary...

"This is a closer view of the 15 min chart, it has a bit of work to do, but I'd say it's in line with the amount of time left in the base/reversal formation which I'd say is at least halfway completed. A head fake move in this rounding base pattern would be an ideal area to add or start a new long position as well as to look at call options. I'll set price alerts for a move below support of this rounding pattern."

It just so happens, the very next day (today), gold futures saw a monkey hammering pre-market and gold/gold miners have a pretty tight correlation...

GLD/GDX Correlation

 Here's GLD in green and GDX in red, as you can see they move together in a fairly tight correlation. Note the move would have taken out support for both GLD (which we will look at as well)  and GDX creating the volume that head fake moves are meant to create, so...

 This yesterday a negative 1 min divegrence was put in for Gold futures as seen to the left and this morning we saw the results of that negative divegrence sending gold futures lower, thus GDX/NUGT, the next trading day after I had said,

"Usually there would be some sort of head fake move on a reversal pattern like this just before the actual reversal, if for nothing else, the bear trap it creates causes stronger upside momentum when the breakout comes."

The 30 min gold futures chart has a strong, large positive divegrence in a noticeable range as well, so they'd be very high probability for a head fake move too.

So far, as you can see above on the 1 min Gold futures chart, it does look like a head fake move as there's no downside confirmation, but rather a positive intraday divergence in to the move lower.

As for GLD and GDX...

 So far the intraday 1 min GLD chart seems to be calling a head fake move as well as there's a positive divegrence on the move down which created quite a bit of volume as it took out stops through multiple levels.

 This is the trend view of GLD 1 min (same chart as above, the same positive divegrence in an obvious range as gold futures also above.

And the GLD 15 min chart, this probably wouldn't have enough time to confirm a downside move so I'll check in on it later, although I don't expect to see one.

As for the larger cup and handle base I had talked about last week and specifically in Friday's post linked at the top, here it is. Note the descending triangle, this is a price pattern technical traders will short as they expect a break to the downside, thus as a head fake move, it would be very effective in creating momentum from a short squeeze/bear trap.

As for NUGT/GDX, this is the range with a false upside breakout that created downside momentum and a rounding reversal process, the one I said on Friday would likely see some kind of head fake move before an upside reversal. I fully expect to see volume shoot up considerably today, it already has for this time of day.

THIS IS THE MOVE I WAS TALKING ABOUT ON FRIDAY IN WHICH I SAID I WOULD WANT TO USE AS AN ENTRY OR IN MY CASE, TO ADD THE REST OF THE NUGT POSITION IN TO...

 "A head fake move in this rounding base pattern would be an ideal area to add or start a new long position as well as to look at call options. I'll set price alerts for a move below support of this rounding pattern."

This is how GDX has reacted so far.

We always want to confirm a head fake move, even if the probabilities are very high that we have one. Correctly timing a move like this is an excellent entry point for call option positions as well.

Look for further updates today...