Torrid Advances in Gold ETFs Warrant Warning

Michael Ballanger explains how he’s reacting to the advances within the gold ETFs.

Given the torrid advance in gold (GLD [SPDR Gold Shares]) and the leveraged miner ETFs (NUGT [Direxion Daily Gold Miners Index Bull 3x]/JNUG [Direxion Daily Junior Gold Miners Index Bull 3x]), it’s of notice that RSI readings have screamed northward to the purpose the place I do not suppose I can recall a shift in momentum fairly this shortly or with such torque. Now, it does not mechanically observe that these ETFs are going to crash. In actual fact, lengthy after RSI readings topped out in February 2016, NUGT and JNUG continued to make new highs for the transfer. Nonetheless, at this time’s set-ups seem like much like 2016 so warning is warranted in each exiting too quickly and staying too late, so how I cope with that’s to take down a portion of the chance and that’s exactly what we did yesterday.

GLD is considerably extra overbought than the miners so having pitched 50% of the June $120 calls yesterday (@ $5 plus), I’m jettisoning the remainder in an effort to leg out to the September calls in some unspecified time in the future sooner or later. The preferable entry level shall be in late June or early July or if the RSI numbers can get again to round 30 and ideally the 20s in order to mirror an oversold situation relatively than the present overbought situation now we have at this time.

The junior miners too had a riproaring rally in early 2016 that mirrors the transfer we simply had, which seems to have culminated on Monday shortly after I put out the “SELL” on ½ JNUG positions at $eight.50 and which noticed JNUG shut at $eight.66, thus triggering the sale. As we have a look at the opening right here on Tuesday, JNUG is opening $eight.21 bid. NUGT closed at $19.10 on Monday and is known as $18.30 bid. We have been gunning for a $19.50 sale on ½ positions however have been too aggressive within the goal so we stay 100% lengthy NUGT however we did liquidate the entire calls yesterday so it was an ideal but considerably imperfect end result. I’m providing 50% of the NUGT place at this time at $19.00 however worry it’s once more too aggressive.

On the subject of profit-taking, yesterday’s well timed exit of the Vampire Squid put place at very near the highs is an illustration of simply how essential it’s to set targets and follow them. I’ve been writing concerning the squid since final fall and as I consider it’s a firm that has its most glamorous days squarely within the rear-view mirror, I exploit it as a proxy for shorting the S&P 500. We took earnings on these GS July $180 places yesterday morning and, identical to clockwork, the interventionalists stepped up this morning and have the value not simply “up” however up and OUT of the hole I recognized a month in the past when the inventory was nearing $200. RSI dipped beneath 30 by midday yesterday registering a solidly oversold situation and at this time resides at 40.09, in order a lot as I hoped to see a continuation transfer right down to the December lows, I caught with my unique goal, which was a transfer to “fill the hole” right down to $180. Yesterday’s low at $180.73 coincided with the RSI backside so the sale of the places at $6.60 took self-discipline, and nowhere is the significance of self-discipline extra evident than in at this time’s value of $188 and people July places again at $three.80 bid. Greed is an evil foe and the arch enemy of profitable hypothesis.

Getchell Gold Corp. (GTCH:CSE) has undoubtedly accomplished its two-hole program and I eagerly await an replace from the corporate with particulars similar to lithology. Assays are most likely a month out however given the enormity of the Scorching Springs Peaks goal (1-kilometer cubed zone of elevated resistivity), the potential is big and at a market cap of $7 million (f.d.), the shares signify a superb hypothesis. There’s additionally the difficulty of the present (CA$zero.15) funding, which continues to be open however may shut in a heartbeat given the pending information.

That is it for at this time; I’m off to the health club an effort to recapture my youth however one thing tells me that recapturing even “late maturity” could be a strong victory.

Oh effectively…

Initially educated in the course of the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis College the place he earned a Bachelor of Science in finance and a Bachelor of Artwork in advertising earlier than finishing post-graduate work on the Wharton Faculty of Finance. With greater than 30 years of expertise as a junior mining and exploration specialist, in addition to a strong background in company finance, Ballanger’s adherence to the idea of “Arduous Belongings” permits him to focus the observe on deciding on alternatives within the world useful resource sector with emphasis on the dear metals exploration and improvement sector. Ballanger takes nice pleasure in visiting mineral properties across the globe within the unending hunt for early-stage alternatives.


1) Michael J. Ballanger: I, or members of my speedy family or household, personal securities of the next firms talked about on this article: Getchell Gold Corp. My firm has a monetary relationship with the next firms referred to on this article: Getchell Gold Corp. I made up my mind which firms could be included on this article primarily based on my analysis and understanding of the sector. Extra disclosures are beneath.
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Charts courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no assure or guarantee on the accuracy or completeness of the info supplied. Nothing contained herein is meant or shall be deemed to be funding recommendation, implied or in any other case. This letter represents my views and replicates trades that I’m making however nothing greater than that. All the time seek the advice of your registered advisor to help you together with your investments. I settle for no legal responsibility for any loss arising from the usage of the info contained on this letter. Choices and junior mining shares include a excessive degree of danger which will end result within the lack of half or all invested capital and subsequently are appropriate for knowledgeable traders and merchants solely. One must be accustomed to the dangers concerned in junior mining and choices buying and selling and we suggest consulting a monetary adviser in case you really feel you don’t perceive the dangers concerned.

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