Given the torrid advance in gold (GLD [SPDR Gold Shares]) and the
leveraged miner ETFs (NUGT [Direxion Daily Gold Miners Index Bull 3x]/JNUG
[Direxion Daily Junior Gold Miners Index Bull 3x]), it is of note that RSI
readings have screamed northward to the point where I don't think I can
recall a shift in momentum quite this quickly or with such torque. Now, it
doesn't automatically follow that these ETFs are going to crash. In fact,
long after RSI readings topped out in February 2016, NUGT and JNUG continued
to make new highs for the move. However, today's set-ups appear to be similar
to 2016 so caution is warranted in both exiting too soon and staying too
late, so how I deal with that is to take down a portion of the risk and that
is precisely what we did yesterday.
GLD is somewhat more overbought than the miners so having pitched 50% of
the June $120 calls yesterday (@ $5 plus), I am jettisoning the rest in order
to leg out to the September calls at some point in the future. The preferable
entry point will be in late June or early July or if the RSI numbers can get
back to around 30 and preferably the 20s so as to reflect an oversold
condition rather than the current overbought condition we have today.
The junior miners too had a riproaring rally in early 2016 that mirrors
the move we just had, which appears to have culminated on Monday shortly
after I put out the "SELL" on ½ JNUG positions at $8.50 and which
saw JNUG close at $8.66, thus triggering the sale. As we look at the opening
here on Tuesday, JNUG is opening $8.21 bid. NUGT closed at $19.10 on Monday
and is called $18.30 bid. We were gunning for a $19.50 sale on ½ positions
but were too aggressive in the target so we remain 100% long NUGT but we did
liquidate all of the calls yesterday so it was a great yet somewhat imperfect
result. I am offering 50% of the NUGT position today at $19.00 but fear it is
again too aggressive.
On the topic of profit-taking, yesterday's timely exit of the Vampire
Squid put position at very close to the highs is an illustration of just how
important it is to set targets and stick with them. I have been writing about
the squid since last fall and as I believe it is a company that has its most
glamorous days squarely in the rear-view mirror, I use it as a proxy for
shorting the S&P 500. We took profits on those GS July $180 puts
yesterday morning and, just like clockwork, the interventionalists stepped up
this morning and have the price not just "up" but up and OUT of the
gap I identified a month ago when the stock was nearing $200. RSI dipped
under 30 by noon yesterday registering a solidly oversold condition and today
resides at 40.09, so as much as I was hoping to see a continuation move down
to the December lows, I stuck with my original target, which was a move to
"fill the gap" down to $180. Yesterday's low at $180.73 coincided
with the RSI bottom so the sale of the puts at $6.60 took discipline, and
nowhere is the importance of discipline more evident than in today's price of
$188 and those July puts back at $3.80 bid. Greed is an evil foe and the arch
enemy of successful speculation.
Getchell
Gold Corp. (GTCH:CSE) has undoubtedly completed its two-hole program and
I eagerly await an update from the company with details such as lithology.
Assays are probably a month out but given the enormity of the Hot Springs
Peaks target (1-kilometer cubed zone of elevated resistivity), the potential
is enormous and at a market cap of $7 million (f.d.), the shares represent an
excellent speculation. There is also the issue of the current (CA$0.15)
funding, which is still open but could close in a heartbeat given the pending
news.
That's it for today; I am off to the gym an effort to recapture my youth
but something tells me that recapturing even "late adulthood" would
be a solid victory.
Oh well…
[NLINSERT]
Charts courtesy of Michael Ballanger.
Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of
the data provided. Nothing contained herein is intended or shall be deemed to
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and replicates trades that I am making but nothing more than that. Always
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no liability for any loss arising from the use of the data contained on this
letter. Options and junior mining stocks contain a high level of risk that
may result in the loss of part or all invested capital and therefore are
suitable for experienced and professional investors and traders only. One
should be familiar with the risks involved in junior mining and options trading
and we recommend consulting a financial adviser if you feel you do not
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