Benzinga - by Melanie Schaffer, Benzinga Editor.
Direxion Daily Gold Miners Index Bull 2X Shares (ARCA: NUGT) was rising about 1.2% higher on Wednesday, continuing to hold steady amid high volatility in the price of spot gold, which came ahead of the November jobs report set to print on Friday and the Federal Open Market Committee meeting next week.
Spot gold reached a new all-time high of $2,146.79 on Monday before retracing to close under the previous all-time high of $2,081.82, which was printed on May 4. If the commodity continues to run higher, bullish momentum is likely to trickle down into the gold mining sector, beginning with large-cap companies and eventually flowing through into juniors.
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For traders hoping to catch the potential bullish break in the gold mining sector, NUGT is has settled into several bullish chart patterns and looks to be headed over the 200-day simple moving average (SMA) if gold continues to hold above $2,000.
NUGT is a double-leveraged fund that is designed to outperform the NYSE Arca Gold Miners Index by 200%. The ETF tracks several gold and silver mining companies, with Newmont Corp (NYSE: NEM), Barrick Gold Corp (NYSE: GOLD) and Franco-Nevada Corp (NYSE: FNV) making up 26.55% of its holdings.
It should be noted that leveraged ETFs are meant to be used as a trading vehicle by experienced traders, as opposed to a long-term investment. Leveraged ETFs should never be used by an investor with a buy-and-hold strategy or those who have low-risk appetites.
For traders wanting to play the gold mining index bearishly, Direxion offers Direxion Daily Gold Miners Index Bear 2X Shares (ARCA: DUST).
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The NUGT Chart: NUGT has been working to form a possible bull flag pattern, with the pole formed between Nov. 10 and Dec. 1 and the flag forming since. If the pattern is recognized and NUGT breaks up from the flag formation on higher-than-average volume, the measured move is a whopping 38%, which suggests the ETF could fly toward the $46 mark.
- Although NUGT has been trading in a slight downtrend within the flag, the ETF is trading in a fairly consistent uptrend on higher timeframes. The most recent higher high was formed on Friday at $36.48 and the most recent higher low was printed at the $32.57 mark on Tuesday.
- If NUGT’s bull flag is recognized, the ETF will regain the 200-day SMA, which will suggest a new bull cycle is in play. If that happens and NUGT can remain above that area for a period of time, the 50-day SMA will eventually cross above the 200-day, causing a golden cross to form.
- Bearish traders want to see spot gold react negatively to new economic data and then for big bearish volume to come in and knock NUGT down under the 50-day SMA, which would negate the bull flag and possibly accelerate downside pressure.
- NUGT has resistance above at $37.68 and at $41.31 and support below at $33 and at $28.13.