JNUG ETF: An Investor’s Diary Part 6

Time to push the panic button on the JNUG ETF?

Bullion.Directory precious metals analysis 23 October, 2014
By Terry Kinder
Investor, Technical Analyst

Sometimes you have to be just a little bit crazy to be an investor. It can take insane amounts of work to come up with what you believe to be a solid investment idea. Then you have to be a little crazy to stand firm when everything starts to turn against you. Your emotions can work against you and make you want to push the panic button.

Time to push the panic button on the JNUG ETF? Image: pixabay

That has been my experience today with my investment in the JNUG ETF, but I’m still here. You might think I’m nuts to still hold the JNUG ETF. It’s not your typical buy and hold stock. It’s more like a buy, hold and then have a nervous breakdown kind of stock. But, there is some method to my madness as well as a little madness to my method.

The madness began several months ago when I noticed a pattern, what appeared to be an underlying cycle in the price of the JNUG ETF.

At first it was just something visual that could be seen looking at the chart. But, it was more than just something seen, there was something hidden from plain view that was driving the price. That something was a series of cycles, akin to sine waves of varying lengths, that could be teased apart and put back together to provide clues about the future momentum and direction of price. Since first seeing the pattern with my own eyes, and then sensing that there was something more than met the eye, figuring out the JNUG ETF price cycle has become an obsession with applications and implications beyond just one particular investment. Understanding the price cycle of JNUG ETF can provide insights into other prices and provide clues about the price of the U.S. Dollar and gold.

This obsession has taken me on a journey that lead to encounters with the works of J.M. Hurst, W.D. Gann, Edward R. Dewey, Martin Armstrong and the Foundation for the Study of Cycles. Each step of the journey led me to become more convinced that there are cycles that affect everything around us from history to prices and much more. Often, our failure to see these cycles or understand them isn’t an indication that they don’t exist, but instead points to our lack of understanding about them.

Despite all of the research on the JNUG ETF, the countless hours creating, printing and pouring over charts, it can be difficult to fight the fear that comes when things don’t go as expected.

Whether it is fear of losing money, fear of failure, worry about what others will think or simply fear of the unknown it can be challenging to not let fear get the better of you. Yesterday the JNUG ETF closed at $8.67, but my investment needs to be higher than $11.20 and change to be profitable. Today the JNUG ETF fell to as low as $7.61 meaning that the investment was down over 30% during part of the day today. I’m not going to lie, it made me want to sell the JNUG ETF and then go and hide in a dark corner, but then I started thinking about writing this article and there seemed to be something humorous in it. I began to smile thinking about writing about how horribly wrong the investment was going and the idea of facing the loss calmed me. It was bad, but unlike Monty Python’s parrot, I wasn’t dead yet.

I must not fear. Fear is the mind-killer. Fear is the little-death that brings total obliteration. I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain.

Frank Herbert (Source)

If you are distressed by anything external, the pain is not due to the thing itself, but to your estimate of it; and this you have the power to revoke at any moment.

Marcus Aurelius (Source)

Never be afraid to try something new. Remember that a lone amateur built the Ark. A large group of professionals built the Titanic.

Author Unknown (Source)

Fear is corrosive, it can eat away at your insides, consume your dreams and steal your hope for the future. I used to be horribly afraid of heights, to the point where I was afraid to even climb a ladder.

I got over it by joining the Army and choosing a specialty that required me to parachute from an airplane on a regular basis. The act of joining the Army allowed me to meet my wife Silvia while working in Guatemala. She was a friend of a friend and we met for the first time when my group threw a going away party for a friend. I found her very attractive but a little intimidating. She made me nervous and a little afraid. Somehow I managed to summon up the courage the next day to call her and ask her out on a date. It was the best thing I ever did in my life because a little over a year after that first date we were married. Had I allowed fear of rejection to get the better of me, it would have never happened and I would have missed out on the love of my life for over 20 years. OK, enough of the mushy stuff.

Don’t get me wrong, fear can be a good thing and can keep you alert and alive. For example, you don’t want to parachute out of a plane with someone who isn’t afraid to jump. A person with no fear is dangerous. You need a little fear to focus your attention and make you more aware of your surroundings. But, you don’t want to be so ruled by fear that you are afraid to try new things. You don’t want to be too afraid of what other people will think or say. I like the quote above that talks about the Ark. You shouldn’t be afraid to try new things or worry too much about what the professionals think. What works for you in life and investing may not be what works for somebody else. Your technique may not fit in with what the “experts” say is correct, but if it works for you consistently and is based on study, knowledge and experience, then you should not change just because someone says you are wrong.

That brings us back to my investment in the JNUG ETF. My approach has probably been wrong in many ways. Hindsight being 20/20, I should have waited for price to drop further to begin investing. Instead, I ended up trying to catch a falling knife, grabbing a little too soon and holding the investment far longer than the professionals would deem smart. I don’t like looking stupid or losing money any more than anyone else does. I am often my harshest critic, and it isn’t likely that anyone can offer up a critique that hasn’t been run in my head before. But, the process of being self-aware, willing to look at my own weaknesses, and the strength and weaknesses of my own ideas, and those of others is a tremendous help when it comes to investing. It was that process of looking at my JNUG ETF investment idea over and over again for months that got me through today when I was staring at a better than 30% loss and wondering if it was a stupid idea to begin with. Investing in the JNUG ETF wasn’t and isn’t a stupid idea and I’m going to show you why with a few charts.

JNUG ETF Cycles Charts

As you can see in the JNUG ETF cycle chart above the JNUG ETF price first topped around 10-25-13. The JNUG price then dropped in 4 waves – A, B, C, and D before rising to a new top after 1 and 2.

The second JNUG ETF cycle chart above highlights one of the imperfections of cycle analysis. At T (A) and T (B) we see two “tops”. The top labeled B is the actual top, while the “top” labeled A if the first peak in price that conforms to the larger cycle. These two “tops” forced a compromise of sorts on this JNUG ETF cycle chart. In essence the cycle count for the next top was started from the actual top labeled B while the peak in price labeled A was used for the previous count. It is an imperfect compromise, but it allows for a chart that is more or less consistent and can still be used to determine future low and high prices. Again, as in the first JNUG ETF cycle chart, the price drops in waves A, B, C, and D after topping at T (B) and rises at 1 and 2 before peaking at T again.

In the last of the JNUG ETF cycle charts you may have noticed that the down part of the cycle has lengthened quite a bit, almost to the point of needing to add an E wave down. It will probably take until tomorrow to know for sure if the E label needs to be added or not, but it doesn’t change the up labels. You may have also noticed that the wave up labeled 2 is just the tiniest little bump up. Because wave 2 is so tiny, I’m anticipating that it’s likely that the high price at the point labeled T may not be as high as the $36.00 achieved at the previous top back in July. Here are some other possible (not sure if they are very probable) outcomes because of the very tiny wave 2:

Price peaks later than usual, perhaps on the other side of the top labeled T;

There are two “tops” similar to what happened on the earlier chart, one “top” somewhere after the 2 wave occurs and the actual top on one side or the other of T;

Price peaks after wave 1 but before 2 and has another peak somewhere near T

There are, of course, lots of other possibilities, but those are a few of them. I’m not necessarily looking for any exceptions to occur, but am open to the possibility that the next peak in price won’t be picture perfect. This last JNUG ETF cycle chart is one of the main reasons why I decided not to sell any shares of JNUG earlier in the day when it was way down. If this cycle is anything like the previous ones, then it is near the point where it should bottom and start to turn back up. The fact that the price dropped from $8.67 yesterday, gapped down to open at $8.37, fell as low as $7.61 and ended the day above $9.00, despite a weak performance for the gold price, gives me hope that today just may have been a turning point. On the JNUG ETF cycle chart above you may have noticed I labeled the last visible price “The point where hope, greed and fear meet.” That is exactly what that price represented, the intersection between hope, greed and fear, and hope, perhaps with a little bit of greed, won the day today.

So, if the last JNUG ETF cycle chart presented was one of the reasons I held on to my position today, that implies there was at least one other reason why I didn’t sell. Another important reason I decided to wait and see what happened today was because of the closing gap between the gold price as represented by GLD and COMEX continuous gold and the JNUG ETF price. Below are two previous cases of a gap opening between JNUG and the gold price and then closing right as the JNUG price bottomed.

The final chart above shows the current gap between the gold and JNUG ETF prices. It appears that the gap is narrowing, but it is not yet certain that the JNUG ETF price has bottomed.

Today was, to say the least, an interesting day to be invested in the JNUG ETF. It was a day where hope, fear and greed intersected. In the end, hope won out based on prior study and analysis of the price cycles and patterns of the JNUG ETF.

Sometimes you have to be a little crazy to be an investor. It helps to have a little method to our madness plus some madness in your method.

Links to other investor’s diaries in this series:

Part 1
Part 2
Part 3
Part 4
Part 5
Part 7
Part 8
Part 9

This license allows for redistribution of this article, commercial and non-commercial, as long as it is passed along unchanged and in whole, with credit to Bullion.Directory, linking to the original article.
 
Bullion.Directory or anyone involved with Bullion.Directory will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading in precious metals. Bullion.Directory advises you to always consult with a qualified and registered specialist advisor before investing in precious metals.