The Gold Bugs Index smashed through ‘hidden’ resistance at 175.86 on Friday, implying that bulls have bigger things in mind. The subsequent pullback from p2=182.16 has validated a pattern and its 196.68 target. To get long, I’ll suggest a ‘mechanical’ bid at p=167.64, stop 157.96. Since it’s a Sunday night and one can’t tell what kind of mood will prevail as the new weeks begins, I’ll suggest initiating the trade ‘mechanically’ only if Comex April Gold opens relatively quietly — i.e., within $3-4 of Friday’s settlement price. Less caution would be needed in the unlikely event the correction comes all the way down to x=153.12. You could buy there with a stop-loss at 138.50. If you prefer to use options instead of stock, stick with at-the-money calls that expire in 2-3 weeks. If, after buying calls, the initial move should be up, allowing one to leg into a $1 vertical call spread for free or even a small credit, don’t hesitate to nail down risklessness at the first opportunity. ______ UPDATE (March 12, 2:07 a.m.): The 167.64 bid would have filled painlessly, since HUI pulled back to 167.25, well above the suggested stop-loss, before blasting off. Now, exit half the position at p2=182.16; and another 25% at 196.62, just below our immediate target. Both orders should be held o-c-o with a stop-loss at 172.54. ________UPDATE (March 14, 11:4 p.m.): The last rally leg missed 182.16 by inches, leaving us stuck with the position. A ‘dynamic’ trailing stop would have taken you out of half at 180.51 with a nice profit, but since I didn’t suggest this explicitly, I’ll assume 400 shares still held with a 167.64 basis. For now, place a stop-loss at 165.24.
_______ UPDATE (March 16, 11:13 p.m. ET): This afternoon’s ballistic rally bids fair to push this vehicle to 188.10, the ‘D’ target of this pattern on the 30-minute chart: A=159.89 (3/2 at 10:00 a.m.): B=182.74 (3/4 at 10:00 a.m.); C=-165.25. Exit half (i.e., 200 shares) on the opening and use a dynamic trailing stop to exit an additional round lot targeted on 188.10. The last 25% of the position should be held for a swing at the fences. _______ UPDATE (March 18, 9:09 a.m.): A closing sale of 200 shares at 183.13 at the final bell and the sale of an additional 100 shares at 188.10 were easily possible when HUI surged to an intraday high at 189.13. We remain long 100 shares whose cost basis has been reduced by profit-taking to 116.20, for an implied paper profit thus far of $6460. We’ll keep the last round lot for a swing at the fences.
