Currently, an account related to LOTM is short Gold using the ETF DZZ Deutsche Bank AG DB Gold Double Short ETN.
Our reason for being short Gold is strictly technical. We are not smart enough to wade through all the arguments, pro and con, about owning or not owning Gold. Gold, as with the other ETF’s, tends to move ahead of the actual news and events anyway. If we can monitor the price action with simple price crossing moving average technical analysis, perhaps we can catch a trend if a trend develops. Let’s look at Gold as a real trade for us as well as an example of what we are trying to accomplish.
DZZ Deutsche Bank AG DB Gold Double Short ETN
DZZ is an inverse ETF for Gold, meaning that it goes up in price as Gold comes down in price. It is a mirror image of Gold’s price movement. The double short means that DZZ is leveraged to be twice the movement as the actual move in Gold.
Our primary trigger for buying and selling when trading is the price of the DZZ crossing its respective moving averages. In the chart below, we have the 50-day moving average, the 150-day moving average and the 200-day moving average. DZZ‘s price has crossed above its 50-day moving averages signaling a short-to-intermediate term trend upwards (downwards in the actual price of Gold). In order to signal a change of the long-term trend of Gold, the price of DZZ would need to cross above its 150-day and or its 200-day moving average. At this time, we can only say that Gold is in a short-to-intermediate term correction. That’s how we are viewing Gold at this time: as a trade for the short term.
We suggest you, without exception, use a stop loss if the trade goes against your position. In this case, a stop loss at about 10% below your cost is suggested to exit the trade. Our upside target is not established yet. Please change your stop loss to be 10% below any new intraday high on the prices of DZZ. In that way, you can follow the share price higher and still keep your stop loss relevant to the changing price. A second exit strategy would be to sell at a close of the price below its 50-day moving average. On the upside, we would like to suggest you try to allow the price to rise as much as possible; we are trying to catch a trend. Trading targets on the upside of the current price are at the resistance levels of $8.92 – $9.24 and $10.52. Resistance levels can be located at www.stockTA.com.
*An account related to LOTM has a position in this security. Neither LOTM nor Tom Linzmeier is a Registered Investment Advisor. Please refer to our full disclosure in the Subscriber Agreement.