GDX/NUGT Follow Up

After yesterday's GLD / GDX / NUGT UPDATE in which my opinion at the end of the post was,

"I think that's good correlation in multiple timeframes. I'd take NUGT or GDX long here."

it's nice to see a small victory this morning with GDX & NUGT up, however now we have the pullback we expected earlier this summer; we have the large base, we have the late-comer longs to NUGT wiped out of their positions and are in a good place to build a solid base for a solid move which I believe could be one of the few PRIMARY Bull trends in the market over the coming year or more. In the midst of all of this, there will be trading opportunities like yesterday.

 Looking at NUGT's (3x long GDX / Gold Miners) downtrend, it's obvious that price is peeling away to the upside, there's a change in character which leads to changes in trends. Volume is also quite high recently on this daily chart suggesting a capitulation or selling event, akin to someone crying out, "Uncle!".

One market maxim is, "To make money you must see what the crowd missed" and there are numerous ways to do that, but look at what happens when I change the timeframe from a day to a 3-day chart, suddenly the candlesticks themselves show the change in character and the flame-out to the downside as well as a large head fake move below previous support where we bought (white) last time and where we sold (red) for a 40 and 50% gain. Note the increased volume as stops are run below support and the last small bodied Star candlestick, a reversal candle or loss of momentum indecision candle.


 Looking at GDX's long term year plus inverse H&S base, the last area we sold on the first breakout day invokes the theme, "From a failed move comes a fast reversal". The breakout attempt was weak and that's why we exited on the first day of it trying, despite a nice daily gain, the 3C charts weren't there and we didn't leave anything on the table as price moved laterally until the pullback. However the same principle quoted above applies to the stop-run move below support, this is a momentum builder for a real breakout of the base and mark up to stage 2, the bull market trending stage.

 Like Gold's 60 and 30 min chart and NUGT's as well, GDX's 30 and 60 min charts have remained in leading positive position, one of the largest leading positive position divergences I have seen with incredible confirmation, this looks like the pullback we were expecting in earlier this summer for a base that supports a breakout move to stage 2 mark-up or where the money is made in the bull trend.

 Note NUGT on a 5 min chart intraday yesterday broke support, ran stops as the volume picked up on the break of support where stops are piled up and popped this morning, this is a nice start and maybe a trade, but...

Ultimately, on this 60 min chart, this is what we want to see, a wider base created just like the former base, a "V" reversal to the upside here would not hold the kind of move we are looking for, so we may trade in and out of NUGT and DUST while this process is under way, but this is what we are looking for to hold a long term core long in GDX or NUGT, maybe some options trades as well.