Gold Stocks & Stop-Losses

Hi Dave,

I am long NGD, apparently from lame levels, and have a decent unrealized loss at this time. Any advice on setting a stop-loss?

Thanks.

Larry  B. – La Quinta, CA

Larry,

Thanks for the question.

The first questions I would ask you are:

  • Is this a trade for you? Or….
  • Are you building a longer-term position to take advantage of a macro development?

If this is a just a trade, then a break below $2.40 would suggest lower levels and that your timing is off.

However, if you are like me and the clients here at Aspen Trading, we are viewing this trade as longer-term based on the insane Fed policies and have slowly built this position. We too are underwater on it, but I have advised all along to build slowly. I have nowhere near a ‘full’ position so for me I am not even close to my maximum risk on this trade.

If you are not comfortable with your position size presently – it might make sense to scale it back a bit and then add when prices are starting to show signs of a rebound.

The last thought I would leave you with is as follows:

For me, longer-term positions based more on macro/fundamentals vs technicals do not tend to have stop-losses. Here is why:

  1. A price level being invalidated does not disprove my fundamental thesis
  2. Since it is not a technical trade and one that is harder to ‘time’ I never go in with a full position. Thus if a draw-down occurs it is never too painful.

Since we are on the subject of gold. Here is some research on gold I shared with Aspen clients this morning (June 22, 2017)

Good morning traders.

It looks like we have some decent price action brewing in the gold sector this AM.

While many grumble about the price action in this sector, the fact is, for the year, GLD and GDX are up 11% and 4.7% respectively. These are not bad numbers. The S&P’s are up 8.1% but carries FAR MORE risk in my opinion.

In fact, I would argue that GDX & GLD are set to make a nice move to the upside at some point based on the technical backdrop.

GDX

Drilling down to an intra-day time frame we can see that GLD appears to be making a nice push higher too and as long as $118.62 holds, we will see at minimum a move towards $119.73.

GLD – short-term view

However, that is not the level I am focused on. The fact is if we complete a 5-wave move higher in and around $119.73 it suggests a larger move higher could be unfolding.

GLD Daily

 

Have a question for me? Just ask.

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