GDX / NUGT Trade Update

I'm going to do a quick review of the longer term probabilities in gold miners (GDX and the 3x long Gold Miners, NUGT) and also take a look at our recent long position which is the first in some time as we have had very few signals until now which is actually good as GDX has been stuck in a lateral range that would have produced little more than break-even at best and more likely, multiple losses.

 This is a long term volume confirmed inverse H&S bottom in GDX, there's a bottom in GLD too, but I prefer gold miners as before QE they use to lead gold and I suspect (as well as from the gains we've seen) as we exit QE, they'll likely reclaim that correlation.

The choppy zone or meat grinder I mentioned above is in the yellow box to the far right.

 This is a closer look at the area in GDX, the red trendline is the inverse H&S's neckline. We opened a long in NUGT as it slipped below support on a head fake move in the white accumulation area and sold it the same day it broke out above the neckline which is counter-intuitive as far as classical technical analysis goes, that would normally be where TA would encourage you to buy. There were a few problems, one is volume confirmation is exceptionally important in an inverse H&S top and the volume on the breakout was a red flag that something wasn't right. We also had 3C signals showing us that there was distribution in to the breakout so the closure of the NUGT position led to a gain of +40% and +50% as we had two different entries,  however as you can see, we didn't leave more than a half a percent or so on the table through that choppy range so the exit in my opinion was tactically perfect.

From there we received signals to expect a large consolidation and likely a pullback which I was looking forward to as we could confirm buying in to the pullback and enter a new position, but GDX/NUGT just moved laterally consolidating through time rather than price.

 As you can see the 60 min GDX chart has not fallen apart, but it has not offered any significant entries either, more or less in line with what would probably be considered a healthy consolidation, but nit a very telling one.

The thing that gives me confidence in GDX/NUGT on a longer term horizon likely as primary trend (bull market) trades is the chart below.

The GDX inverse H&S and a huge 2 hour leading positive divegrence, the 4 hour and daily charts have interesting positives as well, but none as strong as this one. I don't think this is off the table, just on hold.

 Very recently we entered a GDX/NUGT long as a positive divergence larger than any seen over the last 2 months popped up, Trade Idea (Swing) NUGT Long and the next day we added some to the position, Trade Management: Adding 25% to Yesterday's NUGT Long.

Recently I've seen some signs that a pullback/consolidation within the most recent trade is growing...

 For example the relative negative in GDX's 5 min chart, NUGT as well.

And NUGT's 3 min relative negative as it approaches gap resistance.

For right now, both are pretty close to in line as they have been since the move up started, but I suspect a pullback is coming as NUGT is now up +12.5% on the week. I do think there's still plenty of upside room on this current leg so I'm not planning on closing or cutting back the position unless something changes dramatically for the worse.

However if you are interested in some Trend Channel stops, here are two that have held this week's trend thus far and their stop out levels on a closing candle below the stop point in their respective timeframes.

A 60 min Trend Channel gives NUGT some room to consolidate a bit, but also is a wider stop in case it does pullback soon, right now it's around $44.25 and will continue to rise for the time being. Remember the stop requires a 60 min candle to close below the highest point of the lower channel (even if the channel dips after that, it's still the highest point of the lower channel.

The 30 min Trend Channel is tighter and has tracked the trend very closely, but no stop outs. Currently this is at $44.50, but will lock in more gains a bit faster than the 60 min, but also allow less room for consolidation intraday.

As I said, I have no plans on closing the position even through a pullback as the supporting 15 min positives have plenty of room to support more upside, that is unless charts deteriorate more and look like this run is being sold off.