With gold reaching an all-time high north of $2,500, many gold stocks had swing trading setups as a result. Here was a quick profit we made in the VanEck Gold Miners exchange traded fund.
The Setup For Gold Stocks
With gold coming out of a decade-plus cup with handle, gold stocks had to be on our swing trading radar.
An attempted breakout in the gold miners quickly fizzled (1) but that didn't knock them off our radar. The VanEck fund formed a short double-bottom base and the middle of the "W" shape (2) offered a potential entry.
This is why Jay Woods thinks we might be in for some volatility aftershocks.
The follow-through day, on Aug. 13, saw the start of a brief pause in the VanEck fund right under the prior resistance (3). When it punched through a couple of days later, the relative strength line crossed recent highs and we added the ETF to SwingTrader (4). We started with just a half position in the gold stocks ETF. We try to let our positions earn their higher weights.
Taking The Quick Profit
The easiest trades are the ones that give you immediate feedback that you are on the right track. How do they do that? They go up. The fund had a nice follow-up the next day and we made it a full position. (5)
But then it seemed to lose steam just under 40. Our decision to trim on Aug. 21 was three fold (6). First, we had a good profit and could lock some in. Second, the fund came up sharply from the bottom and the pause under 40 would be a good place for it to digest its gains.
Third, with a number of subsequent follow-through days showing up in the market, we were looking to rotate to faster stocks that could provide more outperformance. We were also noticing that the S&P 500 was on track to trigger a power trend. Another reason to lean into faster-moving stocks.
When gold stocks took another hit the following day (7), we took the remaining half position off. Again, protecting the profits that we had and freeing up cash for deployment elsewhere.
Now that the fund has found support at its 21-day moving average and showed a little bounce on Thursday (8), maybe it will get another chance. The stocks that we rotated into have had mixed results and we've been seeing a lot of reversals from breakouts and bounces. It's another reason why the quick profit-taking might still be the way to go in the current environment.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Justin Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.
