I warned you that gold will plunge and it’s doing exactly that. Gold is declining quickly and at the moment of writing these words its trading at $1,718.55, so it’s very close to the target of ~1,700.
Today’s intraday low in the GDX ETF is (so far) $30.89, which means that our exit price for this ETF was already hit (therefore, our short positions in it were closed). The same with the DUST – it moved slightly beyond our exit target of $24.88.
The important detail here is that even though gold continues to move lower, GDX is actually showing… Intraday strength (!). Unlike gold, after a quick pause in the $1,730s, GDX didn’t move to new lows, but rather is trading back and forth slightly above $31. This is bullish for the short term, and it’s a sign telling us that a short-term corrective upswing is likely about to start.
Now, while the GDX (and DUST) moved to its exit level, the GDXJ (and JDST) didn’t. So, the question becomes: what should one do with the position in it.
In my view, it’s time to move the exit targets higher, in order to greatly increase the chance of exiting the position at favorable terms today – before the rebound.
GDXJ and JDST will most likely move to our original targets (and beyond), but not without correcting the recent move first – or so it seems.
So, the current exit price for the GDXJ ETF is $45.22, and the current exit price for the JDST is $12.46.
Moreover, if none of the above-mentioned targets are reached, but gold moves to $1,704, I think that closing any remaining positions would be justified from the risk to reward point of view, anyway.
Additionally, if gold moves to $1,703, I think that LONG trading positions in GDX will be justified from the risk to reward point of view with $33 as the next target.
Alternatively to GDX – if one seeks to gain leverage, one might consider going long (when gold moves to $1,703) NUGT (2x leverage) or GDXU (3x leverage – not recommended for most due to the significant leverage, but might be interesting tool for more advanced traders).
The size of position for this very quick long position would be regular.
We are not using GDXJ here for the sake of simplicity in case of this quick trade and because GDXJ didn’t reach support that’s as strong as the one that the GDX ETF just reached.
Please note that the above is for the “trading” part of one’s capital only. It’s not about the long-term investment (we remain out of the market here) or insurance parts of the capital.
As always, we’ll keep you - our subscribers - informed.
Przemyslaw Radomski, CFA