I'm not sure that it has bottomed yet so I haven't pulled the trigger yet but I do count 5 small waves down after that clear 4th wave completed. Of course it's always possible that this is only 1 of 5. If you want to wait for good evidence of bottoming before buying then wait for the break out of the top rail. Of course the other alternative is to buy now and then set tight stops. The other alternative is to take a 20% position at these prices and the buy more if it goes lower
The conventional wisdom gold chart says that gold is now tracing out wave 5 of A which, when finished, should be followed by a fantastic, mult-imonth a-b-c rally before crapping out again to a lower low of around $750. After gold bottoms in its C wave I would be careful about being in the dollar because once this massive correction is over then gold will be in an all new and powerful uptrend as inflation finally hits the economy. When that happens gold will hit ridiculous new highs, several thousand an ounce, as the dollar begins to finally wither after 100+ years of dominance. We still have 1-2 years before that happens but it will certainly happen and you should become afraid when you see congress finally stripping the federal reserve of powers because then it is a small step for corrupt greedy congress to take control of the money supply and begin effectively setting inflationary policies in order to buy votes from a hurting (but still clueless) populace.
But long looks into the future are not terribly helpful for staying focused on the near term trading opportunity. As you can see, JNUG is clearly trading in a narrowing channel. The typical way for these to end is to stop mid channel or to go kiss the bottom rail or to break below the bottom rail and do a throw under. I've modeled two of the 3 scenarios below. If the red path is to be taken it could turn back up at any time and probably will begin doing so in the next 1-2 days.
Of course, the dream scenario would be the blue path: a blow out bottom to the lower rail or just below it. In either case, the minimum retracement is likely to be back to the level of the prior 4th and it could go much higher, as in back to the start of the falling wedge. In either case, the minimum retracement should be back to the level of the prior 4th. That would be more than 60% from today's price of $7.58.
Another thing to note is that while GLD has rallied since the start of Oct, the juniors have killed. This tells me that the miners are ahead of the metal in terms of the count. So, it may turn out that metals continue to fall after miners have found a bottom.
Also, the chart of PAAS is sitting at long term support. There is no guarantee that it will hold but this is where smart traders would buy the shares and then set a 5% stop in case it cannot hold support. Do not hold if it cannot maintain this support line because if the mid channel does not hold then the next support is all the way at the bottom of the channel which would be ~2$. Of course the price is really not important. The stock will stop plummeting when a valid termination wave count has been printed.
But if it gets down there then of course it will be strong buy. PAAS is not guaranteed to keep its divvy but right now the divvy is 4.70% which is not bad for long term holders. They have plenty of cash (381mn) and relatively small debt (69mn). They will no BK even if silver goes to $7 again because silver will not remain down there for very long. Anyone with a brain will buy as much metal as possible at those kinds of prices.
What will be very interesting will be to see what happens to GLD during the equity crash. At some point I expect the flight to quality to include the flight to gold and silver. It could happen that oil just keeps plummeting in a deflationary spiral while gold and silver are treated as safe havens (cash) instead of being treated like a commodity which many people mistakenly believe it to be.
No comments:
Post a Comment