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Market News: Will Dow Jones Plunge Pop Gold?

Posted On October 11, 2018 11:16 am

Market News: Will Dow Jones Plunge Pop Gold?
By now you know the Dow 

Source: Fidelity.com

We’ve drawn in the current resistance line at 19.24, and the next level up at 19.81.  The 19.24 level is defined by multiple highs that couldn’t get past that price.  It’s the most simple technical analysis tool.

The next level up takes some explaining, but it’s not too hard.  Technicians call “gaps down” in a chart “falling windows”.  The upper level in a falling window is the bottom of the upper candlestick.  Which is where the 19.81 price comes from.  See, that wasn’t so bad.

The difference in these is only 57 cents.  It’s hard to think of 57 cents as a target you want to chase hard.  What can one do?

Well, one can turn to a leveraged ETF for the gold miners.  Since we were looking at GDX, which is an ETF for senior gold miners, we can look at NUGT, which is a 3x leveraged ETF against GDX.  Note that NUGT is based on GDX, not its own basket of mining stocks.  This makes our job a bit easier as we don’t have so many things to watch.

Here’s the 3-month chart for NUGT, with two levels that correspond to the GDX levels we just found.

Source: Fidelity.com

In this case, the levels are at 14.34 and 16.76, for a range of 2.42.  And that 2.42 is against a lower base price of 14.34, rather than the base for GDX at 19.24.  You can see why short-term traders prefer NUGT over GDX, while longer-term traders who don’t like so much volatility go for GDX.

You might want to keep an eye on NUGT these next few days.  If NUGT does get up through 14.34 and investor concern continues, this might be one of the few bright spots in the market.


The Gold Enthusiast

DISCLAIMER: The author is long NUGT and JNUG, and may trade these positions over the next 48 hours.  The author has no position in GDX and has no intent toward that security.  Position sizes in question are not large enough to affect the market.

Originally posted at Mike Hammer – The Gold Enthusiast

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