NUGT: Reverse Split Apparently NOT a Buy Point for Gold

by JDH on May 6, 2017

Last week I proudly proclaimed that the NUGT Reverse Stock Split was a Buy Point for Gold.  Apparently not.

As we can see over the last six months, NUGT – Direxion Daily Gold Miners Bull 3x Shares NYSE + BATS bottomed around $22.50 (split adjusted) just before Christmas, and then peaked just under $55 (split adjusted) in early February.  I thought the $30 level from early March would serve as support, so I was a buyer at that level.

Clearly I was wrong, or at least early, as NUGT traded below $27 on Thursday.

NUGT needs to get back to $34.46 just to touch the first Fibonacci retracement level, and somewhere closer to $45 to demonstrate that this correction is over.  Not a pretty picture.

So what am I doing?

Buying, of course.  I picked up more NUGT at $29.75 on Friday.  Here’s my strategy:

Clearly I can’t pick exact tops and bottoms, and I can’t pick precise inflection points.  If I could, I would be rich.  So my strategy is to buy all the way down, and sell all the way up.  I don’t know precisely where those points are, so the key to this strategy is to always keep cash on the sidelines, ready to deploy as needed.

I am currently 41% in cash.  If NUGT has weakness on Monday, I’ll buy more.  I’ll put buy orders in at $27.50, $25 and $22.50.  I hope none of those orders are filled, but if they are I will have averaged my cost down, and I will be ready for the bounce back up, because as we can see, NUGT is a very volatile stock.

From February 10 to May 4 it lost half of its value.  But from December 19 to February 10 it doubled in value.  That’s how it works, so I don’t want to be selling in a panic at the bottom, because it’s likely to bounce back.  I want to be largely invested while it’s low, and selling all the way up.

I will either make a lot of money, or get wiped out.

Tune in again next week to see what happens.