Monday, December 15, 2014

JNUG update

On Friday I held JNUG over the weekend but with the proviso that it either popped up at the open or I would get stopped out very quickly (stops were set at $2.59).  Of course, this AM I got stopped out immediately on the gap down to $2.43.

Over the weekend I had another look at the gold chart and expressed some concerns about the shape of it.  In fact, I wrote:

I suggest keeping the following things in mind for next week:

  1. These leveraged ETFs often have a habit of bottoming in the low to mid $2 range.  TVIX eventually fell to $2 and JNUG could as well.
Because of this, I waited until $2.17 to get back in but even that proved to be ambitious.  They took it all the way down to $2 into the close but I saw this as a capitulation move and decided to cancel my stop before they took me out. They would have done so had I left the stop in place but since the damage was already done I decided to hold my new position over night again tonight. I will be quick to let it go tomorrow AM if we do not move back up very near the open.


In any case the potential for a final capitulation bottom certainly existed in my mind and today's JNUG drubbing might have been just that.  Still, GLD has not fallen to Avi's target yet and JNUG closed the day right at $2.  I don't know much but I do know that if they let JNUG go very much lower then too many people are going to be able to get in at this ridiculous level before the next pop goes off (and it certainly will pop again at some point...).  Those who have been shorting gold and miners will have to unwind at some point and the juniors are compressed super springs waiting to be released.  There will be little controlling them when they do decide to move. 

In any case, here is the updated JNUG model which now has a much more credible 5 wave movement to the 4th wave down.


A break back up through that orange trend line will be the first sign that the trend has changed upward.

Note for those who lost money on JNUG today like I did:

I lost a good deal of money today speculating on JNUG using an incorrect wave count.  It happens.  But I limited my loss to faaar less than a "buy and hold" person because I use stops.  As a result, I will actually ended up with slightly more shares in my account at the close than I did at the open.  So while the dollar figures are lower in my account, the share count is actually higher.  When this turns around (and it will turn around!), this is going to skyrocket my account value.  I'll continue to use stops and I will continue to be very happen if when I do get stopped out the shares subsequently step into an open elevator shaft like JNUG did today.  One comment today was the JNUG was disappointing.  I can understand that point of view but I personally view it as a net positive even though my account value took a hit from being overweight JNUG today simply because my stops saved me from eating the full loss.

Time will tell when this begins to move up again but the chart was ready to start moving back up anytime and now we have the Russian bombshell of moving their interest rates to 17%.  Tomorrow should be a very interesting day in M+M!

4 comments:

Anonymous said...

Hi Captain,

Looking for your insight on whether to buy some more JNUG here in the low $2.00's range. What are the charts saying? Is the upcoming 1-10 reverse split (effective next Tues 12/23) potentially going to bring this down even further?

Thanks,
~J.T. Marlin

The Captain said...

JT, We are in the twilight zone so to speak. Very near a bottom but "near" can be 30% for something like JNUG due to its ridiculous volatility. For most people I still recommend to "buy something golden" and just hold. Something preferably without time value in it. GDXJ is a good choice.

But I prefer more action and apparently you do too. So I am trading JNUG until it will prove to me with 5 solid waves up that a real bottom is in.

I rode it up this AM for holding overnight last night, thought I might be golden here. Then got stopped out on the lower low at 1.97 around 10:45. So I counted 5 more down, bought in on the first pull back from the rise to 1.96 (buy in price 1.87). And now I am holding with stops set to 1.95 (at least until I see 5 waves up).

Why 1.95? Because until 5 waves up happen, wave 4 must not go into the region of wave 1 which peaked at 1.96.

After 5 waves up into [1] occur I will actually loosen my stops to 1.81 because the pullback can be a deep vee into [2] and I don't have time to watch it today. I know that if I get stopped out while still in a motive move up then it will pop higher into wave 3 up without me.

This is a round about way of saying that I still believe the bullish count for GLD. Also, look at the massive dip and then recovery on DRD. That was not a misprint, that was done on 170k shares of volume. So all the weak hands are getting flushed right here IMO.

These turning point are always stressful and turbulent but it comforts me to know that GDXJ, an ETF with zero time value associated with it, is down 90% from its peak. I am not chasing here, that is for sure. We are much closer to a bottom than to a top and just like TVIX which was up 50% in the blink of an eye, JNUG will do so as well. Cheap oil, cheap copper, cheap gold are not going to last forever because the fiat currencies of the world are now in great distress again despite global coordinated central bank intervention since 2009. A global currency crisis will be good for gold as people rush back to store their value in the only real money that ever was.

Always JMO!

Anonymous said...

Thanks Captain! I'm holding some sub $25 per share GDXJ as well and will probably add some more too at these levels. TRX hitting new lows as well. I almost have to buy more at these prices. I don't think these guys go BK anytime soon and, if they can just weather the storm a little, TRX will be at least a 10x return at these prices.
Thanks again,
~J.T. Marlin

The Captain said...

JT,a suggestion: get some diversification in the juniors. I like DRD. But you are right, TRX is going to move up like it was JNUG but without the options time value.

Still, all juniors are a bit like options in that if gold stays low for too long they starve. This is why the market treats them so darned harshly at times like this: everyone gets risk averse to the extreme thus leaving real value on the table.

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