Briefly: In our opinion (full) speculative short positions in gold, silver and mining stocks are now justified from the risk/reward perspective.
Today’s alert is going to be short and there is a good, and actually quite satisfying, reason for it - everything developed as we had expected it to. In general, everything that we wrote yesterday remains up-to-date. Gold and the rest of the precious metals sector simply took a breather yesterday (charts courtesy of http://stockcharts.com).
As you can see on the above chart, the volume was tiny. This tells us that yesterday’s small upswing was not an important reversal - it was just a pause within a bigger move. The move, naturally, has been down, so yesterday’s pause is actually a bearish development, even though gold moved a bit higher.
The breakdown below the declining support/resistance line on the above GDX chart was not invalidated yesterday, so the bearish implications remain in place.
Overall, we can summarize the situation today in exactly the same way as we did yesterday:
Summing up, the decline in gold took it well below the 300-day moving average, which made the situation even more bearish, and the same goes for mining stocks and the breakdown below the declining support line. Since the situation became more bearish, it seems that adding [which today means keeping the double-size short position] to the short positions is now justified from the risk/reward point of view. Please note that we might see a pause here, but it’s unlikely that it will change anything.
To summarize:
Trading capital (our opinion): Short (full) position in gold, silver and mining stocks with the following stop-loss levels:
- Gold: $1,353
- Silver: $21.73
- GDX ETF: $28.30
Long-term capital (our opinion): No positions
Insurance capital (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.
As always, we'll keep you - our subscribers - updated should our views on the market change. We will continue to send out Gold & Silver Trading Alerts on each trading day and we will send additional Alerts whenever appropriate.
The trading position presented above is the netted version of positions based on subjective signals (opinion) from your Editor, and the automated tools (SP Indicators and the upcoming self-similarity-based tool).
As a reminder, Gold & Silver Trading Alerts are posted before or on each trading day (we usually post them before the opening bell, but we don't promise doing that each day). If there's anything urgent, we will send you an additional small alert before posting the main one.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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