NUGT forms a Cup and Handle Pattern

by JDH on October 22, 2016

Is this the bottom?  I don’t know, but it looks promising.

nugt-oct-21-3months

As the chart of NUGT – Direxion Daily Gold Miners Bull 3x Shares NYSE + BATS (a 3x leveraged ETF) shows, the bottom may be in the $11 range.  It closed Friday at $14.44.

Of course this could be yet another “bear trap” rally.  Who knows.

The down trend line from August is still intact, so before we can declare victory, two things must occur:

First, a close above $15.89, the lowest Fibonnaci level, and then second, a close above the down trend line, probably around $18.

Regardless, it’s encouraging.  This week I liquidated some of the holdings I bought to average down.  I booked a profit, and increased my cash, so that’s good.  I’m still under-water, big time, on this holding, but I don’t think it takes a massive amount of imagination to return to the levels of August, at which point I’d be in a significant profit position.  So, we wait.

Here’s another view of NUGT:

nugt-oct21-2016-cuphandle

Since the beginning of October NUGT has developed a classic cup and handle pattern. After the big shakeout on October 4, sellers clearly were drying up.  What followed was a few days of consolidation, and a fight with the 200 Day Moving Average at the bottom of the cup.  The close on Friday was slightly above the 200 DMA.

The handle of the cup is a low volume pullback, which is good.  Presumably as the anemic volume increases this week we break out of the cup and handle pattern, and the next target will be to fill the gap between roughly $16 and $17, which is where the cup and handle pattern started.

Filling that gap, and remaining decisively above the 200 DMA, and having the 200 DMA cross over the 50 DMA, would signal that the bottom is in.

Or not.  This may all be mumbo-jumbo.  We will know soon enough.

Bear in mind that NUGT is not a core holding in my retirement portfolio.  This is closer to gambling than investing (or we could call it speculating).

I still believe there are cracks in the economy, and with the U.S. election looming on November 8, anything can happen, and probably will.  Uncertainty and upheaval is generally good for gold.

We shall see.  For now, I’m not selling.  Thanks for reading.  More next week.