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Direxion Daily Gold Miners Index Bull 2X Shares (NYSE:NUGT) was consolidating on Tuesday after closing Monday’s session on top of the 200-day simple moving average (SMA) –a level a stock or ETF rarely breaks through on the first attempt, which Benzinga pointed out on Friday.
The move lower came in tandem with spot gold, which was trading down about 1% after reaching a new all-time high of $2,195.15 on Friday, where the commodity’s relative strength index was measuring in at about 84%, indicating gold was heavily overbought.
For NUGT, Tuesday’s downturn was taking place on decreasing volume, indicating that the bulls are taking a breath rather than that the bears have gained control. The ETF was also working to print a hammer candlestick, indicating the local bottom may have occurred.
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NUGT is a double-leveraged fund that is designed to outperform the NYSE Arca Gold Miners Index by 200%. The ETF tracks several gold and silver mining companies, with Newmont Corp (NYSE:NEM), Barrick Gold Corp (NYSE:GOLD), Agnico Eagle Mines Ltd (NYSE:AEM), Wheaton Precious Metals Corp (NYSE:WPM) and Franco-Nevada Corp (NYSE:FNV) making up its top five holdings.
It should be noted that leveraged ETFs are meant to be used as a trading vehicle by experienced traders, as opposed to a long-term investment. Leveraged ETFs 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).
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The NUGT Chart: NUGT’s retracement on Tuesday came down toward the eight-day exponential moving average (EMA), where bulls came in and bought the dip. The price action was causing the ETF to form a bullish hammer candlestick and possibly print a higher low, which could confirm a new uptrend.
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