The
6th week of the stock market challenge for finance has just
concluded, and for the first time throughout the race I have ended the week under
the 100 000 dollar standard. After 5 weeks of positive total gains in the
challenge, my collapse was out of the ordinary, as my continual method of
analyzing and researching have been extremely successful. For the week of
October 3rd, market talk within our classroom was surrounded around
gold ETF’s, exchange traded funds, specifically Direxion NUGT and JNUG. These two
investment funds were similar to stocks, but are a combination of several gold
mining companies that are averaged out through daily gains or losses and are traded
parallel to other stocks in the NYSE. News erupted when both stocks dropped by
over 3 dollars in share value, as over 30 competitors in the challenge had
traded off these two ETF’s for the past 5 weeks, leading to significant gains. Losses
for my peers were much more catastrophic than any other stock dropping due to
the nature of the ETF's. Both JNUG and NUGT were a 3x Bull stock, meaning gains
and or losses were 3 times the value compared to a regular share, and with a 3
dollar drop, losses were upwards of about 30% for several competitors. Fortunately,
the losses for a third of my peers was a significant turning point in the race
for me, as it lifted me over 15 spots to the top 25 of the group. It pushed me
to take greater risks to continue to hold my ranking, but as it came down to
steadily increasing my net worth, I failed miserably.
As
JNUG and NUGT decreased significantly on Tuesday, I realized my opportunity to
increase my net worth considerably had just opened up. With the substantial losses
to my classmates, I was not only close to my goal, but was on the brink of
achieving it. My strategy was to purchase JNUG, as I predicted it would bounce
back as the days rolled on during week 6. As one of the most commonly traded
ETF’s in the world, I came to the conclusion that purchasing a stock like this,
with its unique quality of 3x Bull, would provide myself leeway in the top 20 for
any mistakes that may occur in the final few weeks of the challenge. The choice
was further certain as Mr. Whalen explained the reasoning behind the drop in
JNUG and NUGT during the week. He explained how news on the two ETF’s had
shocked investors, resulting in a share value drop for the two exchange traded
funds, but he explained how the news was actually in favour of the two stocks
and prices would rise back up by the conclusion of week 6 and or beginning of
week 7. Therefore, with a reassuring insight on the decision I purchased the
ETF at a price 11.20 around 12pm on Wednesday. The choice at first was correct
as the share value slowly increased to a peak of about 11.80 around 3pm, which
sat me 16th with a net worth of over 108 000 dollars. With the 5%
overall gain for the day, I was extremely proud of my decision and chose to
continue to hold the stock as I was confident the upwards trend would continue
for the next couple days back to where the ETF previously traded at, about 14-15
dollars. To prevent any losses, I added a limit sell order to the holding at
11.25, to insure I would come out of the share with a preferable gain over a
loss. Unfortunately, the sell order hit its mark and I only came out with a
couple hundred dollars that ranked me 19th at the end of the day. The
result was not in my favour, but I had to settle for a minimal gain as I had
finally reached my goal.
The
final day of trading had approached for week 6 and the market as a whole seemed
very unpromising, as it had been on a decline for the past few days due to many
stocks dropping in value. Both JNUG and NUGT had hit 4-month lows and seemed to
be in no shape and or possibility of investing in, until 12pm Friday afternoon.
Both NUGT and JNUG had begun to rise quite rapidly mid day, and its sizable increase
made me eager in revisiting both ETF’s as tangible options in making profit to
resettle myself in a comfortable position in the race. After dropping to under
11 dollars a share by midweek, NUGT rose to peak of about 12.30, which at the
moment seemed to be the delayed rise Mr. Whalen had predicted on Tuesday. As
Friday was a school holiday, I chose to utilize my previous strategy of
collecting research on the exchange-traded fund to give me evidence to support
my decision. I came across an article from Investor Place, written by Tim
Biggam, who states that gold, especially NUGT had finally showed some stability
after several days of losses on Friday morning. He also explained how investors
who are bullish and are looking for short term; considerable gains should look
at NUGT. This article alone, pushed me to purchase NUGT as my mindset was extremely
similar to the opinion of the author. My purchasing of NUGT would only be a
short-term order and after several thousand dollars in gains I would bow out
immediately, which seemed to be a levelheaded choice as the share value
continued to rise. The stock similar to JNUG rose to its peak after 20 minutes
from the time of my purchase; earning me over one thousand dollars and placing
me top 20 once again. Sadly, just like Wednesday afternoon the share value
collapsed, hitting 11.80, earning me a loss of over 7.25% on the day, and
placing me 33rd in the challenge.
From
this experience of buying and selling exchange-traded funds, I have learned as
well as experienced the volatility of 3x Bull ETF’s. I understand that despite
the high risk of investing in these types of stocks, they are one of only a few
methods in which investors can grow their portfolio in a short period of time. This
lesson in my perspective has been the most significant in my journey of
investing in stocks as it has provided me a new option to reach my goal in the
limited time I have left, 25 days. I strongly believe I can reach my goal of
top 20, and using my new knowledge of ETF’s, specifically gold ETF’s, I will
work towards recovering my losses and earning profit that will lift me among my
competitors.
The first URL under paragraph 3, is hidden. Drag mouse under the paragraph to find link to article on NUGT.
ReplyDelete