Gold - The Perfect Holiday Gift

Double Gold Long (DGP) is an ETN designed to track the movement of gold prices by double. Should the price of gold rise 5%, DGP should rally by roughly 10%. The same is true in reverse. While I tend to play gold largely via long-term futures contracts, I do take some positions in equities that I feel will benefit from a move in the metal.

The Footprints
The weekly chart above shows that DGP’s most recent decline has brought the shares back toward two items that tend to serve as price support: the rising 20-period moving average and the prior high which was formed in the middle of October. The small bottoming tail on the current weekly bar is suggesting that buyers, which have largely been absent in recent weeks, are beginning to step in more aggressively.

When to Sell
This makes for an excellent point for me to begin adding back some (not all) of the shares I sold in late November (see sell point). By now, many of you should know what prompts me to sell. A stark rise that causes the stock to separate and move high above its 8-period moving average (8ma) is the initial sign that it may be time to lighten the load. The second sign involves a sign of weakness such as a topping tail or a retracement of the color green. If a stock rallies far above its 8ma and then experiences a sign of weakness while in this elevated state, it’s time to cut the cord or at least to lighten the load by ½ to 2/3s. As you can see, this was done by me in the last few days of November. Perfect timing!

My Strategy:
Today, I will be adding back 1/3 of the shares I sold in late November. My stop on the position still remains very far away, just under $10. Should DGP experience additional weakness in the coming weeks, I will consider it a gift and will look to add more. Patience is a virtue, and as I get older, I seem to have more and more of it each year. That too I consider a gift.

Have a very Happy Holiday Season.