Benzinga - by Melanie Schaffer, Benzinga Editor.
Direxion Daily Gold Miners Index Bull 2X Shares (NYSE: NUGT) gapped up 0.73% higher on Wednesday, where the ETF ran into a group of sellers who knocked it down toward Tuesday’s high-of-day.
Spot gold was rising higher Wednesday after cracks in the U.S. economy start to show, with U.S. job openings coming in lower-than-expected Tuesday and the Bureau of Economic Analysis revising its economic growth projections downward on Wednesday.
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While NUGT usually trades in tandem with spot gold, the ETF was consolidating slightly lower from where it opened, likely for technical analysis reasons.
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 27.83% 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 (NYSE: DUST).
The NUGT Chart: NUGT has been trading in an uptrend within a rising channel pattern since Aug. 21, making a series of higher highs and higher lows. On Wednesday, the ETF rejected from the top ascending trend line of the channel, indicating a retracement, likely to print another higher low, may be on the horizon.
- The ETF’s most recent higher low was formed on Aug. 25 at $29.41 and the most recent confirmed higher high was printed at the $31.48 mark the day prior. If NUGT retraces on Thursday, Wednesday’s high-of-day will serve as the next higher high within the pattern.
- Bullish traders want to see NUGT break up from the rising channel pattern, which would cause the ETF to regain the 50-day simple moving average as support (SMA), and then for big bearish volume to come in and drop the stock down from the channel pattern, which could signal an acceleration into a downtrend.
- NUGT has resistance above at $37.68 and at $41.31 and support below at $33 and at $28.13.
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