What a turnaround for gold and silver on Friday for gold and silver. This is why you should never hold the triple leveraged ETFs for too long and also, more importantly, if you have a 10% move or more higher, take profit.
Part of the reason for the move higher in precious metals was the economy grew 2.6% last quarter, down from the 4.6 percent in the second quarter and 5% in the third quarter. While consumer spending surged, I view them as the last to know what’s really going on in the economy so I discount it. With the lower oil prices, consumers are finding a little more in their pockets these days and we also had an increase in wages and benefits. Maybe that’s because many companies opted out of health care and gave their employees more as compensation, I don’t know. Wages overall have been decreasing for some time.
Thursday’s Current Thoughts said that it would make sense to be bullish on gold if it went over $1,270 and it closed at $1,284. For silver I said I’d be bullish if it went over $17 and it closed at $17.25. Bottom line is there was profit to be made in both, and especially in the mining ETFs.
JNUG was a very nice trade when it took out the higher high in the morning at 31.23. It could have been ridden up to anywhere from the first real dip to 32.14 or the next dip to 32.72 to as high as 33.66 on that run. It did even go to a higher high or 34.50 before struggling a bit and closing at 34.10, up 12.10% for the day. GDX, NUGT and GDXJ all had similar patterns.
We could get a continuation up on Monday and if so, I would attempt to scalp it on hitting higher highs. If we get a reversal, simply trade the higher high in JDST, especially if we get a dip in the morning.
With the bad news from the GDP report TZA would have been the ETF to play as TNA broke down but is still above 70 closing at 72.49. TZA ended up 6.08% of the day closing at 12.92. It would have been a buy at 12.42. Because it’s a slow move, it’s better to play larger shares and take profit when handed. We did get a dip to a lower low later in the day and it again hit a higher high. I’m still overall bullish on TNA for what it’s worth. Negative economic data, if we see it next week, would be the only thing that would have me change my mind. The U.S. is simply viewed as one of the safe places in the world to park money, whether it be Treasuries or stocks. Gold is also up this year in all currencies.
RUSS continued to a higher high in the morning but if you did the right thing and moved your stops up, you would have at least rode it to 25 as it hit a high of 25.41 before crashing again to 22.19 (where you could have switched to RUSL’s higher high. This trade is now up in the air but I am still favoring RUSS with all the turmoil in Russia/Ukraine.
The good story of the day was another ETF, UWTI, which hit a higher high at 2.66 and could have been rode all the way to just north of $3 before peaking. Moving stops up you would have been out at $3 at least, but some may think that the “finding a bottom” I have been speaking about has come and ride this one a bit longer. If long I would keep a stop at 2.80 at this point. It closed at 2.99.
UGAZ and DGAZ were very volatile and it would have been difficult to get any type of profit from it. I would still play the higher high and lean towards UGAZ to possibly follow energy prices (oil) up from their yearly lows, but I would wait for the daily arrow to turn green first.
Hope your team won the Big Game…or you had a good time with family and friends!
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Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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