Monday, April 6, 2015

[JNUG] breaks out. Most likely the best strategy is to buy the dip.

The backlink post was entitled Crunch time for JNUG.  In it I provided blue and red models, both of which were ultimately bullish.

The updated snapshot is below.  As you can see, it broke out per the red model above.  I count that gap as 3 of 1 of 3.

Zooming out, we can see that this breakout affected a trend line that goes back to mid January of this year.

I do not underestimate the potential strength of the inclining double bottom which has formed.  The minimum target is "higher than the last peak", so let's call it $50 for now.   I currently model that to be the bare minimum and it is more than a 2x price increase from today.

Hyper-conservative models aside, the bounce can and likely will be much, much higher.

In the most bearish case for metals which is EWI's (and many others) view that gold is tracing out the B wave of a huge a-b-c correction that corrects the entire A wave which began down in 2011, the current bounce for gold should come at least to the 38.2 fib which is approximately $1444.42.  I don't have a good charting tool for gold so I am simply using today's ratio between GLD at 116.91 and gold metal spot at 1218.60 (which comes to gold being 10.42 times higher than the GLD EFT) and then multiplying it by what Strategydesk's built in fib calculator shows to be the 38.2 fib of the entire drop of the GLD ETF since 2011 ($138.62).  138.62*10.42=1444.42 and no I did not know it would come to that before I did the calculations.  It is what it is. 

If gold moves back up to $1444 then I think we will see the shorts covering the juniors with zeal and the momo longs will have all piled in as well.  It should pump GDXJ to ~$80 and if that happens then JNUG will likely be a darned sight higher still.

The red and blue models shown above both expect JNUG to power much higher over the next 1-2 weeks.  Time will tell.  A reasonable stop loss trigger for this trade is $20.  We are not out of the woods with respect to downside until we have a higher high than the high of Mar 25th which was $23.30.  So do use stops folks, these are only models and the herd is fluid.

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