Friday, July 11, 2014

GDX / NUGT /DUST Update

This has been a very easy base to predict and follow and a very difficult pullback to confirm. GDX/NUGT are the main trade, DUSt (3x short GDX/Gold miners) is a short term play on a GDX pullback.

Here are the charts, some are about 45 mins old as I have been capturing them and monitoring the situation ion GDX at the same time.

 This is the long term Inverse H&S base in GDX, it's well over a year old, volume confirmation is present and 3C confirmation on this 2 hour chart is quite present, this is why you don't want DUST going against you and hoping it comes back as it is the opposite of GDX with 3x leverage, it likely won't come back.

The main trade idea is to buy NUGT on a pullback or GDX, which they are long overdue for.

 GDX recently broke out above the base's resistance or neckline, but this is the most important part of Inverse H&S confirmation, volume at the breakout should be spectacular, which is one of the reasons I suspect it is a head fake which is something I suspected the morning (pre-market) of the day it broke out so I already had doubts, the lack of volume and follow through just increased them,

On the other hand, there are at least 6 assets that should offer multiple asset confirmation, GDX, NUGT, DUST, GDXJ, JNUG and JDST and it has been very difficult to get apples to apples confirmation, thus the speculative DUST trade idea until/unless charts improve more and become more clear.

"A" is a head fake move we expected and where the largest accumulation on the right shoulder of the major base took place, this is near the area we went long NUGT.

"B" is where we took +40 and +50% NUGT gains off the table as a pullback was looking very likely and I wanted to protect those gains, I still think it was the right thing to do considering the information we had at the time and even what we have now.

"C" is the breakout to stage 2, there are quite a few things missing, not the least of which is volume and 3C confirmation.


 GDX 15 min shows a clear negative divegrence at the breakout area, this would trap new longs on a pullback and create downside momentum which would allow institutional money (the ones who have been building the base over the last year-plus) to accumulate at much lower prices with heavy supply available as trapped longs sell at a loss as former resistance (neckline) becomes broken support.

NUGT (GDX x 3 leverage long) is also showing a 10 min negative divegrence at the breakout area. Typically a stock will pullback just before the breakout and gather strength as well a shakeout the weak hands on the pullback, I believe that's what it coming in GDX, just with momentum as the failed breakout will lead to a fast and stronger reversal which is good for us as our last position made up to +50% which we kept, "Wash, Rinse, Repeat".

 GDXJ (Junior Gold miners which have nearly a perfect correlation to GDX) also showing a 15 min negative divergence at the breakout area, it seems this is a true head fake move, which makes a DUST long entry here a much lower risk trade.

DUST (3x short GDX)  shows an in line status and then a positive divegrence as GDX breaks out and DUST hits lower lows making the entry an excellent price entry with much lower risk,

 Short term GDXJ (Junior Gold miners) shows a negative 2 min divergence at the breakout highs and a small bounce today that has been in line since the small positive divegrence creating the intraday bounce.

However the faster 1 min chart for GDX shows that the bounce today is seeing distribution in to it, which means DU?ST should be seeing accumulation in to it's pullback today.

NUGT (3x long GDX) is also showing the same intraday distribution in to the bounce today.

As DUST (3x short GDX) shows a 1 min positive divegrence in to the intraday pullback, which makes for an excellent entry.

The latest charts since capturing the above...
 I've largely been waiting for intraday charts to turn which is happening in NUGT above


JNUG above

And DUST

If there are better signals or more extreme ones, I'll add to DUST, but make no mistake, if you want to play it safe and with an eye toward the big prize, just wait on a GDX/NUGT pullback and buy that.


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