Feeling Bullish On Newmont, Barrick Gold And Franco-Nevada? This ETF Offers 2X Leverage

Direxion Daily Gold Miners Index Bull 2X Shares NYSE:NUGT gapped up 3% to start Wednesday's trading session and after some early session volatility, the ETF surged an additional 3% from the open due to bullish price action across the gold sector.

The climb higher was in tandem with the S&P 500, which closed up about 3.15% higher after Fed Chair Jerome Powell suggested during his Brookings Institution speech that the central bank could begin easing back on its interest rate hikes in December.

The gold miners sector recently reversed into a bull-cycle, after a long-term downtrend brought NUGT down 75% from its April 18 52-week high of $82.86 to a Sept. 26 52-week low of $20.30.

NUGT is a double-leveraged fund that is designed to outperform the NYSE Arca Gold Miners Index by 200%. The ETF tracks a number of gold and silver mining companies, with Newmont Corp NYSE:NEM, Barrick Gold Corp NYSE:GOLD and Franco-Nevada Corp NYSE:FNV making up 32.42% of its holdings.

It should be noted that leveraged ETFs are meant to be used as a trading vehicle as opposed to a long-term investment by experienced traders. Leveraged ETF's should never be used by an investor with a buy-and-hold strategy or those who have low-risk appetites.

For traders wanting to play the gold mining index bearishly, Direxion offers Direxion Daily Gold Miners Index Bear 2X Shares NYSE:DUST.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

The NUGT Chart: NUGT reversed into its uptrend on Nov. 3 and has since made a consistent series of higher highs and higher lows. NUGT's most recent higher low was formed on Monday at $30.82 and the most recent confirmed higher high was printed at the $34.46 mark on Nov. 23.

• NUGT closed the trading session near its high-of-day price, which indicates higher prices may come again on Thursday. The second most likely scenario is that NUGT will print an inside bar, which would lean bullish for a continuation later in the week.
• NUGT is trading above the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending above the 21-day, both of which are bullish indicators. When the ETF eventually retraces to form its next higher low, traders can watch for a bullish reversal candlestick to print above the two moving averages.
• If NUGT continues to trend higher on Thursday, the ETF's relative strength index (RSI) will reach near the 70% level. When a stock or ETF's RSI reaches that level, it becomes overbought, which can indicate a pullback is on the horizon.
• NUGT has resistance above at $37.68 and $41.31 and support below at $33 and $28.13.

See Also: Could More Countries Start Using Gold Coins to Fight Inflation?