Analysis: The Gold Rush – Navigating the Mining Sector Swell Analysis: The Gold Rush – Navigating the Mining Sector Swell

Written By Michael Gary Scott

Gold Rally

Direxion Daily Gold Miners Index Bull 2X Shares NUGT has witnessed a remarkable surge of about 33% since Feb. 28, driven by the relentless climb in the price of spot gold, hitting new all-time highs consistently throughout the week.

Market Dynamics

The tech-savvy traders are keenly eyeing the $2,195 milestone gold achieved on Monday, propelling its relative strength index into overbought regions. As the precious metal gears up for a consolidation phase, enthusiastic momentum is likely to ripple through the gold mining landscape, commencing with industry giants and trickling down to smaller players.

Trading Prospects

For astute traders looking to ride the anticipated bullish wave in the gold mining domain, NUGT appears poised to transcend the 200-day simple moving average (SMA). Once the ETF clings to this level as a support base and continues to trade above it, the 50-day SMA is on track to intersect the 200-day SMA, crafting a coveted golden cross.

ETF Insights

NUGT, a double-leveraged instrument, is tailored to outshine the NYSE Arca Gold Miners Index by a striking 200%. The ETF tracks a basket of gold and silver mining enterprises, with prominent players like Newmont Corp NEM, Barrick Gold Corp GOLD, and Franco-Nevada Corp FNV constituting a significant chunk of its holdings at 30.05%.

Cautionary Note

Leveraged ETFs serve as agile trading tools for seasoned traders and are not ideal for long-term investments or those with a low-risk profile.

Market Strategy

For traders inclined towards a bearish stance on the gold mining front, Direxion presents Direxion Daily Gold Miners Index Bear 2X Shares DUST.

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Technical Outlook

The NUGT Chart: NUGT witnessed a nadir of $23.15 on Feb. 28, triggering a transformation in direction. The ETF steered above the recent lower high on March 1, nullifying its downtrend. Since then, NUGT has embarked on a consistent trajectory of scaling higher peaks without retracing to establish a higher trough.

  • Amid the daily chart, a fresh upswing necessitates a pullback or consolidation to validate a newfound uptrend. Such consolidation might unfold over upcoming trading sessions, given that a stock or ETF seldom breaches the 200-day SMA on the initial attempt.
  • NUGT exhibited signs of a doji candlestick on Friday, signaling a probable culmination of the recent upsurge. Traders are advised to monitor potential retracement on Monday, offering a compelling entry juncture for bullish participants yet to secure a position.
  • Those with a bearish inclination should await indications of waning bullish vigor and a looming longer-term descent.
  • NUGT faces resistance levels at $33 and $37.68, while underlying support exists at $28.13 and $26.41.

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