NUGT Reverse Stock Split and Buy Point for Gold

by JDH on April 29, 2017

I’m back in gold.

As regular readers of this little blog know, I have a significant percentage of my portfolio invested in gold stocks.  In addition to gold miners, my preferred speculative gold play is NUGT – Direxion Daily Gold Miners Bull 3x Shares NYSE + BATS,  which was over $13.50 in mid February, before correcting to $7.50 by mid March.  This is a volatile stock.

There are two obvious facts to note:

  1. NUGT is very volatile; an almost 50% drop in just under a month is clearly volatile;
  2. The chart since the beginning of February shows that NUGT remains in a down trend.

So how do you play it?

In and out.

NUGT is not an “investment”.  You don’t buy and hold.  It is a speculation, so it’s essential that you pick your buy points, and when you have a profit, get out.

So, on April 11 I sold NUGT at prices in the range of $10.80  (I don’t sell everything at once; I place sell orders for a portion of the portfolio, and sell on the way up).

On April 27 I got back in, paying an average price of $7.80.

I consider my risk on this transaction to be relatively low.  Obviously NUGT could drop lower, but I don’t see it crashing another 50%.  More likely it will drift back up to the 50 day moving average ($8.80) or even the 200 day moving average ($9.58), and that will be a good exit point, at which point I’ll go back to cash and wait for a good entry point.

Keep the risk low, and profit potential high.  That’s the plan.  We’ll see how it works out.

NOTE: Effective Monday May 1, 2017 Direxion, the fund manager of NUGT, will execute a 1 for 4 reverse stock split, thereby reducing by 75% the number of shares outstanding.  So, if you owned 1,000 shares of NUGT last week, you will only own 250 shares this week.  Presumably the stock price will also increase in the same ratio, so the $8.15 share price will jump to over $32.

Thanks for reading.  I’ll report back next week on how it worked out.