Anyone playing JNUG long must respect the support-resistance pivot line shown in blue below. The pressure will be off to some degree once the orange line is broken out but until then, any break back below the blue line means the trade is a bust.
Note that if the model below is correct, waves 1 and 2 of C of E are already in the bag. That suggests that a 3rd wave is on deck and 3rd waves often move fast and fierce, especially in the highly leveraged JNUG. Rapid gains can be had for those who are willing to put up with the volatility of JNUG but we are not talking about unlimited downside volatility here. Through the use of EW for setting entry and exit points, the volatility exposure is greatly minimized. Still, try to buy the dips and not the peaks based on the micro, 1 or 2 minute wave count!
2 comments:
Cap'n,
So, was stopped out Thursday at 21.50. Where do you see JNUG going from here?
Many thanks,
Steven B
I'm glad you used stops. You can see from the chart action how the resistance/support line I drew on the chart was important. Once it lost that support line, the drop was quite rapid. The action from the $36 high back down to $18 all looks corrective to me, like it was a B wave. The save play would be to use that same line that stopped you out as a buy signal if the chart breaks back above it. Another more aggressive (risky) play would be to buy right now and then set your stops below the recent low.
There are two major options here. Either this will turn out to be B of 4 or we are already well into the 5th wave down. The safest option will be to sit on the sidelines to see which one of these it turns out to be. If we get 5 waves up from here to throw over the top rail of the triangle and then it breaks back down through into the body of the triangle, odds are very high that that was C of E of 4 having played out and now wave 5 is in progress.
If we break down to lower than what is marked as D of 4 on the GLD chart then wave 5 is in progress and JDST is the right play.
But when wave 5 of the GLD chart plays out then it will be a very, very high odds play to go long the junior miners which will have gotten beaten into powder by then.
Bottom line: avoid the temptation to be always invested. Look for the sweet, low hanging fruit. Don't climb the tree after the high apples because the risk goes up relative to the reward.
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