Friday, September 23, 2011

Bought NUGT - $31.20

I took another shot at a short term trade today. This time I bought the Direxion Gold Miners Bull 2X (NUGT) a couple of times for an average price of $31.20.  I thought my purchases were close to the bottom but as the hours unfolded thereafter I learned that I missed the bottom by about $2.00. Yeah, that keeps me humble. I got it in my head that the US Dollar was going to turn lower and, well, it did, but not for long.

Above is the closing chart for today of NUGT. At last the trend line break BUY signal came after a rebound off a low of $28.88. The True Strength Index (TSI) indicator is nearing a ZERO crossover, which is favorable. The Money Flow Index (MFI) indicator is nearing a trend line break, as well.

My expectation is that price will now try to retest the consolidation area around $35 and amount to a 38.2% retracement of the past 3 days action, at the minimum.

My TSI trading record has been updated.


  1. Hi John.

    Thanks for all you efforts here. I am a newbie trader and I find great value in your blog.

    I was excited to see this NUGT post as I am in at at 39.98 and feel very nauseous. I don't know what to do now since it dropped so fast. At least now I know what it feels like to be trapped. I don't have any dry powder to average in here with you.

    Is there any hope for the HUI?

    Well off to cook a wonderful supper and take a trail hike before sundown. I have found it's important to keep things in perspective on days like today. Have a great weekend.


  2. Aaron - thank you for your comment. In my opinion, and that is all it is - opinion - I do not think there is much hope for the HUI at this point - at least not for the next couple of months. And by then it is likely to be so much lower that you will wish you had sold it today at a loss. If your time horizon is much, much longer then you will be fine.

    I am just trying to catch a little bounce with this trade. That's it. I think the HUI will be sub $400 in November and I have no intention of holding NUGT that long.

  3. NUGT goes 3x effective December 1 making it even more dangerous to your portfolio (leveraged etf slippage).

  4. Hello Mr. Townsend, do you think we are having a bounce on silver from here, and to what price could be that bounce, something between 34.5 and 38?...any opinion please, thank you for your help.

  5. Hello John. Your response to Aaron concerning the longer term HUI may prove correct. However, there is a case for somewhat more optimism. This equity selloff "feels" like 2008. Back then the PMs started recovery well before the other equities. Also the HUI to gold ratio started 2008 much higher than when this meltdown started. So this HUI selloff may not go as far percentage wise. The miners are much more profitable now compared to 2008 since the gold to oil ratio is quite favorable. Lastly, this is a soveriegn debt driven selloff, unlike 2008 when it was primarily private financial (bank) liquidity. Hence current Fed "reluctance" to go with QE3 may change very quickly with the stakes so high.