Thursday, June 7, 2012

BUY NUGT @ $11.70 - Gold Retraces 61.8%

I had some time this morning to watch things carefully (sure is nice to be on summer vacation) and was looking for an opportunity to get back on the bull for another ride. I managed to resaddle my long position in Direxion's Gold Miners Bull 3X ETF (NUGT) at $11.70 - just 5 cents above what is the low for today (so far, that is).

My TSI Trading record has been updated.

Click on any chart to ENLARGE

The next couple of charts will show you what I was working with in anticipation of buying NUGT this morning. First, there was a price trend line dating back to the May 16 low. I suspected that this trend line may be reached but if violated, not for very long. I placed my initial buy order right at the trend line - $11.50.

But as price neared my target price I began to recognize a problem. The True Strength Index (TSI) indicator was running out of room for price to continue much lower. That is, it was nearly signalling a trend line break BUY, yet price had not reached my target.

At the same time, the Demand Index Triple Stochastic indicator I recently invented had flattened out, was way oversold and then beginning to turn up. Decisions, decisions....  Do I hold out for a BUY at the price trend line ($11.50) and likely get nothing or do I just take a guess and get in?

Simultaneous to this gold (/GC) looked to be completing its melt down and testing the 61.8% retracement I wrote about two posts ago. Anyway, I just changed my limit order from $11.50 to $11.70 and that worked. Here is a look at gold (/GC) and that 61.8% retracement:

Gold reached $1579.4 then bounced. At the moment it is having difficulty getting back up through the 50% retracement level ($1594) so another retest of the $1575 area would not surprise me. It would also not surprise me if NUGT now trades down to the price trend line (now nearer $11.70) and penetrates it slightly. This will trigger some stops I imagine and the smart guys will probably load up and take all they can get.

Finally, I would like to remind readers that this is a bull market for gold and the miners. If/when I have a position in a good miner or ETF that is trading at a loss, I just sit. I do not get emotional and worry about how much money 'I have lost'. The truth is, of course, that one does not lose any money until one sells. 

The bull will correct my timing mistake - my buying 'too high' - if only I am patient

OK - I admit it. I do feel the emotion of being 'pissed' when my position(s) is/are under water. That's because I like to trade and don't like to sit. But as long as my trade is long the bull (and not short the bull) I just deal with it and wait and wait and wait and wait.

Best to you and wishing your trading success,


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