You may have seen my original analysis of the recent gold and silver breakout of multi-year trend lines, here. I recommended getting long via JNUG, as the metals themselves were slightly over-bought and JNUG had put on a nice pattern.
Today, that trade was stopped out (by 1 cent!) and reversed back up again to close on the high on the day. Now, hard as that may be, today's price action only strenghtened my original case. The pullback has refreshed JNUG and PMs and may allow a new move higher. If prices continue to rise tomorrow, we are going to reenter that trade.
I also have another related trade recommendation. But first, JNUG.
Trade 1: buy JNUG
Today, the prices returned to the top of the trading range and closed on the high, showing further support at this level. The momentum remains bullish and the pull back over the last few days may be what was required to refresh the move.
Buy (stop order) JNUG @ $23.21
Stop @ $21.79
Target: Not setting a target for an order, but you can get an idea here
Once we are in, we will keep a wide stop to try to catch as much of a potential very big move as possible.
Trade 2: long spot silver
As I mentioned above, precious metals as a whole had a good day. Both gold and silver fell lower before reversing back into their recent bullish trend. However, gold is still quite over-bought, and is sitting at 2017 highs. Silver is still below its 2017 highs and typically moves with more volatility than gold. I believe if there is more room to go in this recent move, that room lies with silver.
I present below some interesting charts of the Gold:Silver ratio. Firstly a long term chart:
It's interesting to note that peaks in the Gold:Silver ratio correspond to bottoms in the PM markets. This is understandable as silver moves with more volatility than gold. You can see the another peak in this ratio has been forming over the past couple of years while both gold and silver have been forming a new bottom. Now if we look more closely at recent prices in this ratio:
The daily chart of the ratio shows that a descending triangle has been forming since the recent July PM low. This is a powerful bearish pattern and indicates a likely decrease in the ratio, corresponding to an increase in silver price, relative to gold. The red circles represent strong rejections and sell offs at the top of the descending triangle and strenghten the case. Therefore, if the PM bullish trend is to continue, I prefer to be long spot silver. Interestingly, an decrease in this ratio also indicates a rise in the prices of both gold and silver. If prices continue to rise tomorrow, I want to be long.
Buy (stop order) Spot Silver @ $17.92
Stop @ $17.67
Target @ $18.51 (this corresponds to the 2017 highs and may be moved higher)
Reward to risk ratio: 2.4
Bonus trade: long spot platinum
I like this trade for similar reasons.
Buy (stop order) Spot Platinum @ $992.10 (prices from IG)
Stop @ $981.5
Target @ $1036.30 (this corresponds to the 2017 highs and may be moved higher)
Reward to risk ratio: 4.2
If the trade entry is triggered, the stop loss will be adjusted as the trade progresses and our position may be closed early based on price action. Please pay attention to your risk management - I recommend not to risk more than 1% of your account per trade. Note that these three trades are correlated so you may wish to reduce your risk for each trade.
What do you think?
Thanks for reading, any feedback is much appreciated!
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Disclaimer: These are my ideas only and do not constitute investment advice. If you place any trades listed here you are doing so at your own risk and I hold no responsibility for any losses. Please pay attention to your risk management.