One more M+M chart to chew on.

First off, let me say that most people should not be trading M+M anymore.  They should simply buy something and hold it.  Perhaps not JNUG, perhaps GDX for the very conservative, perhaps GDXJ for those who want more play.  Even boring old SLV if you simply don't want any drama.  But the key message I want to communicate is that trading right now is just an attempt to eek the last dollar out of the trade and the market volatility will ensure that most people do a crappy job of that.  Why?  Because there are variables and if you guess wrong on a leveraged thing like JNUG, 25% of your portfolio account balance could evaporate overnight.  Of course, wait another day and if you didn't get shaken at the bottom then it would come back and probably then some.  So unless you have superhuman discipline with stops and have time to read and understand the charts and the risks, stop trading already.  Buy something and hold.

I think it is now safe to talk like this and in fact I think I will begin acting on it myself next week by buying some of the juniors that are now trading in the dirt.  The reason is that M+M have gotten destroyed since 2011.  GDXJ, something with no time value baked into it, peaked at $180 and now trades at $26.  Even more compelling, it is at or near the end of 5 waves down following a massive triangle.  While things can always go lower, the odds strongly favor a bottom being put in at these levels.  Does it really matter if your average buy price is $25 or $28 of GDXJ?  Does it matter really if you buy at $26.35 (today's close) and then it goes down to $18?  I mean, does it really matter?  At some point, a bottom will be put in and when it does the upswing is going to be stupid powerful. 

I guess what I am saying is that you rarely see something as oversold as the miners are right now.  As long as you don't over extend so that pressure makes you bail out at a loss if there is a big downdraft or you get a margin call, etc. then the sure win is to just buy and forget the volatility and go do something else for a few weeks.   If you do this, don't get shaken out at the bottom.  This AM, JNUG swooned to $3.30 in a big gap down taking out stops left and right only to reverse immediately and close up 20%.  The market has taken M+M down so low at this point that lower prices are simply going to bring people out of the woodwork to buy.

So, to summarize, beat the volatility by simply accepting the current market price of whatever your M+M poison might be and then ignoring the swings because prices at this level are still a massive gift even if they do happen to fall lower for a nanosecond.  This is where intelligent discipline has to take control of the herding instinct.  A way to mitigate the fear is to buy something on Monday with 50% of your cash and then only buy more once your initial purchase is solidly in the green.  Then you buy more and place regressive stops so that you might give back some of your profit but never any of the principle.  If instead the issue goes down below your initial tranche, wait until it loses at least 50% before buying more.  If we got another 50% loss in GDXJ down to $13, the upside would be so huge that it would pay to go all in.

In any case, I will likely be posting less charts over the coming weeks after the turn back up in M+M becomes obvious.  It warrants the extra work right now for me simply because I am trying to grub the absolute lowest price possible.  But it will not pay to trade very often once this thing takes off again and most people will zig when they should have zagged. 

Having said all that, here is an interesting view of JNUG.  It depicts a falling wedge which has experienced 5 rail bumps and which has now broken out the top rail after testing and sliding down it a ways.  So that tiny falling wedge that leads to blue 5 is be the C wave of the blue 4-5 transition (inline with my new theory about wedges being 3s or Cs).

In this model, all of that sideways junk would be an expanding wedge 1st wave that could fill the gap and then fall back into the channel but not likely all the way back down  Instead, it would fall perhaps 38.2 or 50fib and then come busting back out with a powerful 3rd wave gap up, probably up at the opening bell so that anyone who did not hold overnight doesn't get paid...

So forget the volatility.  Forget the herding instinct.  Create a trading situation you can live with.  I have done the 50% down now, 50% later after the issue is green before and I found it to be very low stress. In fact, I often found myself hoping for lower prices than my first tranche because I still had a bazooka in my pocket that I wanted to fire a the opposition at even lower prices.  We really cannot fairly expect to catch the exact bottom in this but if we dick around thinking about it too long this will be $6,$7, $8 and we will be afraid to buy because then it will look expensive in light of recent experience.