We hold 200 shares with a profit-adjusted cost basis of 18.90. Lest you grow complacent because we have such a fat cushion built into the position, let me broach a worst-case, bear-market target that I haven’t mentioned before because it seemed implausible in the context of a corrective downtrend. The number, a Hidden Pivot, is 13.90, and we should treat it with respect if for no other reason than that the point B low of the pattern from which its derived is so unsausage-like. Neither does the target look so farfetched when you rescale the chart so that the void between here and it is fully revealed. ______ UPDATE (May 11, 3:00 a.m. EDT): I’ve recommended straddling the QQQs today and I’m going to suggest doing it in this vehicle as well, since we’ve got a nice cushion to work with. With June Gold down $13 at the moment, however, GDXJ could start the day with a gap-down opening that would give DaScumballs license to rape market orders to buy puts, especially out-of-the-moneys. Accordingly, I’ll recommend bidding 0.90 for two June 20 puts, taking 15 cents’ discretion. You should sit out the opening and then work your bid according to market conditions, trying your darndest to resist paying no more than 1.05 no matter what. _______ UPDATE (Sunday): The puts were an easy buy for 0.90 if you sat out the opening as advised. We now hold 200 shares (or a multiple thereof) for 18.90 against two June 20 puts for 0.90. The hedge leaves us net long the equivalent of about 56 shares with underlying trading near $20, but this “backspread” will make us automatically shorter if GDXJ falls. _______ UPDATE (May 15, 1:07 a.m.): If GDXJ doesn’t get traction here, near a 19.46 Hidden Pivot target (240m, A=38l23 on 9/8/11, B=25.22 on 10/4/11) it would shorten the odds of a fall eventually to the 13.90 mind-stretcher broached here the other day. In any event, I’ll recommend shorting June 17 puts equal to the number of June 20s held, for 0.95, good-till-canceled. This trade is only for those who already own June 20 puts for 0.90, as detailed above.
