Direxion Daily Gold Miners Index Bull 2XSharesArca
Description
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Last week I pointed out that with the break out of the pennant formation, the measured move should take NUGT to the $54 area and NUGT came very close to that on Friday. And while I was looking for $54 to complete the measured move, I didn't mean or expect this to happen in one week. With Friday's gap up and doji, we have all the makings of an island reversal for NUGT, JNUG and perhaps dozens of other gold and silver stocks, ETF's and indexes. However, while it may not be nothin' but blue skies for the next few sessions, according to Bulkowski, the island reversal is not a very reliable pattern and while a lot of people think that all gaps must be filled, the truth is that only about 34% of gaps are actually filled. Of course, we never know in advance which 34% are going to be filled.
I think the bottom line comes down to this: A gap up takes and expends a tremendous amount of energy and NUGT, et all, need a few days to build cause for the next move, and, with the completion (or very close to the completion) of the measured move, one has to expect a pull back or sideways consolidation to follow. The RSI at 69 is very close to being overbought and a little sideways action or pull back would allow this indicator to recycle lower and then reset for the next move up. Further, NGUT has been and is likely to remain an extremely volatile ETF.
So my plan for now, subject to change at any time without notice, is to hold through what I expect to be a volatile period for the next few days. However, should gold and NUGT fall off a cliff next week, I'm likely to cash out and wait for the next buy signal.
GL
Edit: Just wanted to add that this doji also has the potential of being an abandoned baby. Either way, island reversal or abandoned baby, both require a gap fill as the confirmation.
Comments
topo54
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Thanks again! Do you see a pullback at 35 area?
CurtisM
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Not sure about NUGT to 35. Possible but first we'd have to have a gap fill. I'm looking for more of a sideways consolidation. However, if we do get a gap fill, then NUGT could drop to the previous break out area which is close to 35.
Thanks for your comments, and GL
topo54
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Thank you - appreciate your view. Next week will tell us the direction. based on previous September pattern..
topo54
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Very good analysis. I am on the other side - got DUST. Waiting for the correction NUGT and profit in DUST. Overall the jump in gold seems more likely a head fake and the performance of the gold miners a disaster.