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How to Short Gold by Going Long With Gold ETF's
By Chris Vermeulen
DZZ Double Gold ETN is a relatively new way to take advantage
of gold price action. This gold fund provides double the movement
that the GLD ETF or the price of gold does, providing bigger opportunities
in the gold sector. I have just recently started to use DZZ ETN
for trading and have found it to be very useful, which you will
see in the charts below.
A Couple of Benefits of the New DZZ Gold ETN
The fact that it's a leveraged fund provides more of an opportunity
to the small investor, as they can have twice the amount of gold
exposure without having to use margin, pay interest, and open
a margin account. While trading with leverage is a two sided knife,
if done properly, potential higher annual profits can be obtained.
Another reason gold ETN's are becoming popular is because they
allow gold traders and investors to trade both sides of the gold
sector within their 401k, IRA and for Canadian their RRSP accounts.
Being able to take advantage of the short side during bear market
conditions, can double your annual return on investment.
Now let's look at our current charts and see how this fund can
Gold Bugs Index -- Monthly Gold Chart Breakdown
As you can see on the monthly chart, the gold bugs index is breaking
down below our support trend line. We could be entering a much
larger consolidation phase or maybe even a bear market. It really
does not matter, as we can take advantage of both sides of gold
(long and short). The short side actually has more potential in
my opinion, but most traders prefer to trade the long side as
it's what everyone learns first and feels comfortable with.
Gold Miner Stocks Index -- Weekly Chart Breakdown
The gold miner stocks index has given us a breakdown, as well
as showing that a short play is not fighting the current short
term trend of gold. It is now testing support, which means short
traders should tighten their stops to lock in more profits when
gold decides to bounce.
Gold Bugs vs Gold Price -- Weekly Gold Chart at Support
Gold stocks are testing a support level, as they have declined
in value against the price of gold, showing that a large number
of investors have been scared out of their positions and thus
forcing gold stocks down more than normal.
DZZ Gold ETN -- How to Short Gold by Going Long
Recently we had a buy signal for the DZZ gold ETN, which has provided
an excellent low risk setup near the end of July. Currently the
trade is up over 28% in just 3 weeks. While we look for the same
type of setup for going short, there is one important point to
note. When trading GLD or any other stock, index or futures contract
to the long side it's important not to enter a setup with a steep
vertical support trend line, as it generally will not continue
for any length of time. But trading to the short side like this
DZZ trade, the trend lines can be steeper, as prices generally
drop much faster, thus pushing our Short Gold ETN fund higher.
This is just one example of how to trade gold to the long and
About the Author: Chris Vermeulen is Founder of the popular trading
site TheGoldAndOilGuy.com. There he shares his highly successful,
low-risk trading method. For 6 years Chris has been a leader in
teaching others to skillfully trade in gold, oil, and silver in
both bull and bear markets. Subscribers to his service depend
on Chris' uniquely consistent investment opportunities that carry
exceptionally low risk and high return.www.TheGoldAndOilGuy.com
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