We’ve been waiting for silver’s strong daily outperformance (at the moment of writing these words silver is trading at $18.40, having rallied over $0.50 today) and we finally saw it today. This is something that many investors view as bullish and get excited, but the opposite is actually the case - silver tends to catch up and outperform in the final parts of the move. Other important developments are:
- GDX moved to the declining resistance line and the September lows (strong resistance)
- the USD Index finally corrected and moved to the upper part of our target area - more or less to the July highs.
Both developments (especially in light of silver’s outperformance) suggest that a turnaround is quite likely just around the corner or that we have just seen it today. Consequently, in our opinion, the speculative short positions in gold, silver and mining stocks are now justified from the risk to reward point of view. We just took profits off the table and closed trading positions in crude oil and on the forex market and it seems that we can now increase them further thanks to the precious metals market.
As always, we will keep you – our subscribers – updated.
To summarize:
Trading capital (supplementary part of the portfolio; our opinion): Short positions (100% of the full position) in gold, silver and mining stocks are justified from the risk/reward perspective with the following entry prices, stop-loss orders and initial target price levels:
Gold: initial target price: $1,006; stop-loss: $1,331, initial target price for the DGLD ETN: $73.19; stop-loss for the DGLD ETN $41.89
Silver: initial target price: $13.12; stop-loss: $19.23, initial target price for the DSLV ETN: $39.78; stop-loss for the DSLV ETN $18.74
Mining stocks (price levels for the GDX ETF): initial target price: $9.34; stop-loss: $27.32, initial target price for the DUST ETF: $297; stop-loss for the DUST ETF $27.87
In case one wants to bet on junior mining stocks' prices (we do not suggest doing so – we think senior mining stocks are more predictable in the case of short-term trades – if one wants to do it anyway, we provide the details), here are the stop-loss details and initial target prices:
GDXJ ETF: initial target price: $14.13; stop-loss: $47.41
JDST ETF: initial target price: $245; stop-loss: $18.59
Long-term capital (core part of the portfolio; our opinion): No positions
Insurance capital (core part of the portfolio; our opinion): Full position
Please note that a full position doesn’t mean using all of the capital for a given trade. You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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