Today’s trade: Direction Daily Gold Miners Bull 3X (NUGT)
The set-up: When interest rates go up, gold tends to go down, and rates are definitely going up today, but that’s not going to surprise the market because this has been priced in for a while. That means that gold should either do really well today, or it will be a non-event.
People haven’t been buying gold into the FOMC meeting, so I don’t expect a big sell-off unless there’s a half-point rate hike. That’s unlikely.
The wild card is no rate hike, and the Fed says economic data is weaker than expected. If that happens, it will shock the market, there will be a flight to safety and gold’s going to pop.
Bonus: The technical view on gold is good too, so things are set-up for an up move.
What I’m doing: I own NUGT on the long side right now – I bought it two days ago with the newsletter — and I own GDX calls. I’m looking at the 200-hourly support line on GDX; if it continues to the upside, I won’t be selling today; if it goes down, I have $22.40 as my exit point. If that downside happens, I would sell NUGT too. If GDX pushes up to $24.00 – which would push NUGT to nearly $40 – I’ll take my profits.
I guess Taylor Conway disagrees with me….Check out what he thinks here.
Jeff Bishop is lead trader at TopStockPicks.com. He runs short-term trading strategies, primarily using leveraged ETFs. At the time this article was published on RagingBull.com, he had the positions described in the article in both NUGT and GDX and was planning to trade them in accordance with this commentary.