NUGT Stop Raised Again, DJIA Quarterly Momentum Chart

 

NUGT shot higher again today, opening at nearly $106 thus clearing the possible resistance at $104 we noted yesterday, and closed up 561% from our mid-January entry.

 

We've set a new stop at $99 for our remaining shares. 

 

Here's a chart worth considering.  It is a quarterly chart showing the RSI and MACD of the DJIA.  It doesn't matter if you know exactly what RSI and MACD represent, however you can click the links if interested in reading about those terms.

 

 

What anyone can plainly see (indicated by the red circles) is that over the past 20 years when the RSI has broken down from overbought (above 70) on a quarterly basis, it was a very dire signal for the stock market.  

 

The most recent such breakdown was earlier this year and, as can be seen on the bottom portion of the chart, the blue line of the MACD has peaked and looks to be on its way to plunging below the red line and taking stocks with it.

Also at bottom of the chart, indicated by the yellow line, we can see that each time the momentum histogram (green vertical bars) rose to a similar level before the plunge.

 

While this is by no means definitive, it is one of many disconcerting indicators that cause us to believe it's prudent to remain hedged and to tighten stops on long positions, or even to speculate on the short side, and we've done exactly that.  

 

Nothing works every time when it comes to markets, however prudence always pays in the long run.

 

 

 

 

 



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