NUGT – The best way to gamble on gold

by JDH on July 20, 2019

Let’s talk about NUGT – Direxion Daily Gold Miners Index Bull 3x Shares, an ETF leveraged three times to the underlying gold shares.  If gold is going up, and I believe it is, you have a few choices:

  1. Buy physical gold – good idea, but you have to store it, which is not particularly convenient, and you have no leverage
  2. Buy gold stocks – easy to to, you get some leverage, but you have to buy the correct stock(s)
  3. Buy NUGT – maximum leverage

A prudent person would do all three.  Have some physical gold, buy a basket of good gold stocks (to diversify your risk), and put your gambling money in NUGT.

How much in NUGT? That depends on your appetite for risk.  If you are crazy, bet it all.  If you are somewhat more risk averse, perhaps a small portion (5%?) of your portfolio is gambling money.

I call it gambling because NUGT is very volatile.  In the pas five days it traded as low as $28.32 and as high as $36.29, for a swing of 28% in less than four days.

That’s volatile, so the prudent speculation strategy is to place below market limit orders so you are not buying at the peak of the market.

Here’s a long term view:

Here’s a four year chart of NUGT.  During that period it peaked at $140 three years ago, and traded as low as $10.58 back in September, 2018.  That’s volatility.  The spike to $35 this week looks like a big spike, and it is, but in historical terms there are a lot of stops to go before it’s back over $100.  The next resistance levels appear to be:

  • $43
  • $45
  • $68
  • $95
  • $140

Looks like a lot of room to run to me.

So what to do?

Common sense would dictate that you watch the RSI, currently at 73, which is very high, and place buy orders when it drops closer to 50, and load up the truck at 30 and below.

If gold keeps rocking, this is an easy double.

If not, it’s back to $10 and you’ve lost two thirds of your money.

Oh well, that’s NUGT.

Enjoy the heat.  More next week.

 

Gold and Bitcoin – Both Looking Good

by JDH on July 13, 2019

Now that gold appears firmly ensconced above $1,400, let’s review the charts:

Here’s the conventional chart, gold, in US dollars, over the last three months.  An approximate double top was formed around $1,440, with a subsequent pull back to under $1,390, so gold must either break below $1,400 or back to $1,440; one of the trend lines won’t hold.

My guess; we’re going higher.

Here’s another perspective: gold, in Canadian dollars:

The chart looks similar, but there was no double top, but again, we have competing up and down trend lines, and unless there is some crazy movement in the Canadian dollar, a move higher is likely.

But how to play it?

I own gold stocks.  My biggest holding is EQX.V – Equinox Gold Corpp.

The chart is much less “pretty” than the gold chart.  After a spike to $1.40 in mid June Equinox has corrected back to $1.17

That’s disappointing, but I think it’s also a great opportunity.  Their production is increasing, and by the end of the year, if production continues as expected and if the gold prices increases, this is easily a $2 stock, perhaps higher.  I have a full position so I’m not buying more, but if I was looking for a stock to buy, Equinox would be on the list.

A higher risk/higher reward strategy is to buy NUGT – Direxion Daily Gold Miners Index Bull 3x Shares, an ETF leveraged three times to the underlying shares.  In theory, if the underlying shares go up by 10%, NUGT should go up by 30%.  They do it with a combination of shares and options.

It’s a short term vehicle.  Options decay over time, so it’s not a “buy and hold for 10 years” play.

I own a small position (I liquidated a bunch in mid June, at a nice profit).  I’ve had buy orders in at $24 that have gone un-filled, so I may have to up that to $28 to increase my position.  We’ll see what the world looks like on Monday.

Why is gold going up?

Who knows?  The conventional wisdom is that as the Fed lowers interest rates, the dollar weakens, and that strengthens gold.  Also, if interest rates are low, you aren’t sacrificing return by taking money from low interest bearing vehicles and putting it in gold (which pays no interest).

It is also a “safe haven” asset, good in times of risk.

Like Bitcoin.

And, sure enough, the chart of Bitcoin looks like the gold chart.

Bitcoin is much more volatile, so if you want to play it, put in orders $4,000 below market, and wait a few days and they’ll get filled.

(This is a chart of Bitcoin in Canadian dollars, as of 8:00 am Saturday morning; if you wait 10 minutes it will look totally different).

I am not a big Bitcoin holder, but if you want to diverse away from gold, have fun!

That’s the update.

I’m still short Tesla, and gradually liquidating my pot stocks.

Enjoy the great summer weather; more next week.

 

 

 

Gold hits $1,400

July 6, 2019

For the first time in 6 years, gold topped $1,400 this week. That would appear to indicate that higher prices are in store for gold.  However, it would also appear that after the dramatic rise of the last month, a short pullback is in order. I of course like to play it via NUGT, which […]

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Bitcoin: It’s Finally Time To Discuss it

June 29, 2019

Last week I opined on whether or not the gold market is moving back into a bull market.  (Yes).  After six years, it’s back. Today, same question, but about Bitcoin: is the bull market back?  Yes. From a peak at around $20,000 (measured in USD fiat currency) in December, 2017, bitcoin dropped to around $3,000 […]

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Is a Gold Bull Market Finally Starting?

June 22, 2019

I have no idea.  Here’s a long term chart: We all know the story: gold went from under $400 in 2005 to $1,900 in 2011, and that was it.  Gold then took two years to drop into a trading range between $1,050 and $1,375, and that’s where it stayed, for 5 years, until this week. […]

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Gold: Finally

June 15, 2019

Let’s start with a long term perspective on gold; here’s the chart: From lows around $600 in 2007 and 2008, gold had a great run, topping out over $1,900 in 2011, before collapsing to under $1,050 at the end of 2015. Of note, gold never fell below $1,000. The epic crash never happened. $1,000 is […]

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Good Shorting Opportunity for Tesla

June 8, 2019

The Tesla bulls are saying “what a great week!”  From a low of $177 on Monday to a high over $210 on Thursday and Friday, Tesla is back, baby! Yeah, no. Despite a bump this week, the chart remains dismal. This dog is almost dead.  Yes, the pump and dump guys did the “pump” this […]

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Gold is Golden?

June 1, 2019

I’m happy to finally get to talk about gold again, after spending weeks talking about Tesla (which is still a garbage stock, hitting $184.10 on Friday, the same price it traded at in September, 2013, so you are not a growth stock if the stock price hasn’t moved in almost six years, but enough about […]

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Time to Stop Talking About Tesla?

May 25, 2019

I am growing bored, and so I may stop talking about Tesla. Or not, it’s hard to say, but I will say this:  Tesla closed at $190.63 on Friday, the same level it was trading at on January 12, 2015.  So, in four and a half years, Tesla’s stock has not moved.  (It’s moved, but […]

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Tesla: Even and Idiot Like Me Can Make Money Buying Puts

May 18, 2019

Watching the collapse of Tesla has been glorious.  Yes, I know the true believers say the car is great (and perhaps it is, particularly if you have never driven another electric car) and perhaps Elon should be given credit for forcing real car makers to make electric cars, but I still believe that anyone who […]

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