Dear Member,
I couldn’t be more excited! Gold and silver are both plunging this morning, gold down more than $42 and silver down over $0.92 an ounce, sliding right into the precise time period and price levels where I expect major lows to form.
So that you can see what I’m looking at, take a look at this amazing chart. It’s not the only indicator I watch, I have several others, but this chart tells you almost everything you need to know.
This is a chart of gold from just before its peak in September 2011 to today. You can see how gold’s downtrend has unfolded.
More importantly, notice how close gold is to a major low.
The first text box on the bottom left of the chart points to a support level generated from a cyclical downtrend channel based off of the September 2011 high. Support is a just a few dollars under gold’s current price.
The second text box, to the right, shows the major support level from the cyclical uptrend channel generated from the 2008 crash low in gold. Again, support is now just a few dollars under gold’s current price.
Combined, this level ― ranging roughly from the $1,170 level in gold to the $1,200 area ― should provide very strong support and could easily become the final low in this now almost two-year long gold pullback.
My recommendation: Without further delay, buy the PowerShares DB Gold Double Long ETN (DGP). This is a gold-based ETN, or exchange traded note, designed to leverage the price of gold by a factor of 2-to-1.
Two important notes:
FIRST, due to the extreme moves occurring in gold and silver right now, volatility is running very high. That means you should expect to see further wild swings, and at first, a rocky ride on this recommendation.
SECOND, I want you to keep risk tightly managed. But at the same, due to the expected wild action, I need to give this trade enough leeway to work out. That means my recommended stop to reduce risk will be a bit larger than usual.
That said, I recommend the following: Use no more than 10% of your total available trading funds to buy DGP this morning. Place a protective sell stop, good till cancelled at $24.36.
Based on DGP’s current price of $27.07 and a stop price of $24.36, you would be risking roughly $2.71 a share, or about 10% on the price of DGP.
Using 10% of your funds, your total risk for this trade, not counting slippage and commissions, would equate to roughly 1% of your total trading equity (10% times 10% = 1%).
Below are the details for the recommendation, where “XX” equals the number of shares you would buy using 10% of the funds you have available.
For instance, if $10,000 equals 10% of the funds you have available for this trade, you would divide $10,000 by the current share price of DGP, $27.07. In this case, it would come to 369 shares. Always round up or down to the lowest even figure. In this example, you would want to buy 370 shares of DGP.
Here are the instructions:
I want to buy “XX” shares of the PowerShares DB Gold Double Long ETN, symbol DGP, at the market. I also want to sell “XX” shares of PowerShares DB Gold Double Long ETN, symbol DGP, at $24.36 STOP, good till cancelled.
Stay very alert. At any moment, I may also add a long position in silver.
Best wishes,
Larry
