The Second, ‘First Lesson’: Go Short

‘Don’t lose money’.

That’s the first lesson in trading.

The other ‘first lesson’; the short side can be (and usually is) more profitable and faster than, the long side.

Anybody’s whose paying attention at this point, knows that ‘something in the market’s going to pop’.

We, in the serfdom, don’t know what or where it is; just that there’s a sense of an event just off the horizon.

From a personal standpoint, to be holding (or maintaining) long during a market upset is the last place one wants to be (not advice, not a recommendation).

Which brings us to shorting the gold market and more specifically, the Senior Miners, GDX.

Senior Miners, GDX

The weekly chart of GDX shows where we are; the market just opened for the day.

It might not look like much is going on … that is, until we show the trading channel.

The right-side trend-line has been purposely shown as ‘dashed-line’ so that when we zoom-in below, we can clearly see GDX, is at the danger point.

This is the exact location where risk is least (not advice, not a recommendation). We’re right at the trendline.

At this point, price action’s still posting below last week’s GDX high of 32.03

GDX Leveraged Inverse, DUST

Looking at the inverse chart DUST, we’ve just posted a new daily low (new daily high for GDX) while at the same time being at Fibonacci Day 21, from the top of the December 15th reversal/correction.

We’ve already had the ‘first correction’ as shown the trade model below.

The ongoing test of that correction was unexpected but not out of the norm for price action behavior.

If the gold miners, GDX are to reverse and continue lower in their channel, today is a high probability day for that reversal (not advice, not a recommendation).

Let’s review the trade model (checklist) thus far:

The System:

1. The Set-Up 
2. The ‘test’ or ‘gut-check’
3. The first ‘correction’
4. Continuation or Failure
   1. Trend identification
   2. Potential channel(s)
5. Exit process
   1. Scale out
   2. Full exit
6. Post trade evaluation

At this juncture, we’re right at No. 4, ‘Continuation or Failure.

A new daily low for GDX and corresponding new high for DUST, shifts probabilities to trade ‘continuation’.

If that happens, we’ll start looking for trendlines, if any.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279