I have made an entry on the long side. This time I have chosen GDXJ. These are Junior Gold Miners and are showing more strength than Gold miners (GDX) themselves and Gold (GLD). Below the last swing low around 25.70 I am not likely to stay long. The exit is mainly based on price behavior itself instead of a hard stop. Gringo
Can't speak for GDX, but I've slowly been watching GLD creep into a good position for a long-term buy. Here are two of the scenarios I'd need to see in order to go long in the near future.
Sitting on razor's edge. In case demand doesn't show up I'll have to exit this position. Position started going underwater from the start and usually it's a sign that things aren't working out well. Gave price enough room due to support showing up around these levels time and again but the lower highs are still in the play and a breach of support will have to be taken seriously. Gringo
Overnight and pre-market gold price dropped but returned upward with strength. I wasn't sure where GDXJ would open but the strength in gold was an indication that there might be demand. At the open there was a gap down, yet the demand showed up right away and price started rising. Seeing this strength I gave traders some room to show their hand. It turned out that the supply never really held sway other than the fact that the open was a gap down. As I result I pulled my hand of the exit trigger. By using the general strength in gold and the quick and decisive arrival of demand I switched my mind to not exiting. Now there are going to be questions about a hard stop and a soft feel about stops. Those following SLA-AMT would have exited at the break of the last swing low or some other criteria. This is the kind of question that a person can determine for themselves. Now, the risk here was genuine and price could have turned down and continued in that direction. It actually still can. The fact that demand has repeatedly defended the 26 or thereabouts area I am willing to give price some more space. Attempts by buyers to lower their bids have repeatedly failed. Sellers discontinue chasing and aren't so willing to part with their goods. For the time being the buyers are forced to raise their bids and chase sellers a bit. This drop down and quick recovery could be considered a shakeout. So far that's what it appears but in hindsight may turn out to be the last chance to have gotten out with the pants on. I'll try to show what's happening currently in the charts below. This might be helpful for some and may appear to be hindsight BS to others. Let me assure you that both parties are correct in their assessments. Gringo
I wouldn't call it a shakeout unless there's a float. More likely it's just a test of selling interest. Since buyers stepped in, that was that, tho there's no guarantee it won't be tried again.
Oh. I mentally wasn't distinguishing between a shakeout and a test of selling interest. Hmmm.. it does change the way I was viewing the situation a bit. Thanks, Gringo
Question Gringo... now sure if this is a smart question or not... but since you're holding overnight... do you have a stop in place? If the market opens lower, at the line where your stop might be, would this automatically trigger an exit at the market? Since you're still in this trade, either you didn't have a stop in or it was lower than how low price hit, is this correct?
You mean a stop order? Is this because its an ETF and hence quite diversified so a huge drop would be very rare indeed?