Category Archives: DUST

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For those willing to speculate with a portion of their funds based on the movement of gold stocks, the Direxion Daily Gold Miners Bull 3X Shares (NUGT) is about to signal a short & long-term buy indication.  We believe this indication will be registered be when NUGT declines below $7.60.  The $7.60 figure seems approximate, however, may change based on market conditions.  Your best confirmation of what we think is an appropriate level to buy NUGT should be based on our Transaction Alert.

As we’ve indicated before, we believe that a decline of –30% or more would not be unexpected for NUGT before achieving the average gain of +20% from the initial “buy” signal.  Our strategy for this next indication is to set aside 1/3 of the amount for the initial signal to buy.  If NUGT declines by an additional -15% then we’d buy more shares of NUGT with the remaining 2/3 of available funds set aside.  An example of how this would play out with $3,000 set aside for this speculation from May 3, 2012 for a 20% rise above the initial “buy” signal is as follows:

• buy $1,000 (1/3) at $11.06 sell and at 20% gain ($13.27)
• buy $2,000 (2/3) at $9.40 or below then sell at $13.27
• the average cost would be $9.90
• a total gain of +34% would be possible if sold at $13.27, or 20% above the initial entry price.

Our purchase of the Direxion Daily Gold Miners Bull 3X Shares (NUGT) is strictly a speculation which we will sell soon after it has achieved our target amount.  Direxion’s DUST and NUGT ETFs are strictly for speculators (short-term) and should not be entered into for investment (long-term) purposes.

After posting our Gold Stock Indicator article on April 4th (found here) and suggesting that a low would be achieved between April 4th and June 7th, the actual low was hit on May 15th. This was well within the indicated date range that a major low would be achieved.

The run-up from the low was on April 15th and generated gains of +67%. Additionally, from when the short-term buy indication was first hit on May 3, 2012, the gain was +21%. We weren't savvy enough to get all of the gains from the indicated low, however, the Gold Stock Indicator appears to be hitting its marks with ease.

At the current pace, our Gold Stock Indicator has a tentative downside target for NUGT of $6.00 before it crosses simultaneously below both the long-term and short-term buy indications, as seen in the chart below. The estimated time-frame for this downside target is approximately 1 and 1/2 months from now.

We expect that the conservative gain of +21% should be expected from NUGT once it first crosses below the short-term buy indication line. Significant downside movement would still remain as was the case after the May 3rd crossing below the short-term buy indication. The amount of decline after the May 3rd indication was -28%, however, the subsequent gains of +21% was achieved in 35 calendar days while the bottom on May 15th achieved gains of 67% in exactly 30 calendar days.

As a caveat, in the same April 4th article, we indicated that “our worst case scenario for a bottom in gold stocks is the period between June 15, 2012 and August 21, 2012.”  Presently, it appears that we are on course to achieve such a worse case situation based on the reversal of the rising trend of the Gold Stock Indicator. Our definition of worse case means a gold price of $1,200 to $1,300 and a NUGT price of $4 or less.