SliderOnTheBlack.com

Friday on my Silicon Investor forum thread, I posted some thoughts on “cracking the gap down shakeout code.”

http://siliconinvestor.advfn.com/readmsg.aspx?msgid=25527704

Concerning “manipulated” gap down opens in this environment with such positive underlying fundamentals for gold and gold stock valuations…

“Two stocks, Barrick Gold/ABX & Newmont Mining/NEM represent about 30% of the 15 member, HUI Gold Stock Index.

When there is a a “real” fundamentally driven sell off, ABX & NEM will be down (on a % basis) more than the HUI, or GDX.

And when when they use “artificial” gap down opens to accumulate, ABX & NEM will be down less (on a % basis) than the HUI, or the GDX.”

This market has been full of blatant manipulation. From Rick Santelli’s call out on the thousands of options bought on the 10 Year U.S. T-Bill just hours before Ben Bernanke confirmed the Fed’s monetization plans, to the smackdown of gold in the pre-open on the same day, only to be followed by a $64 intra-day rally off those lows.

While the tape can be easily manipulated, the one thing than can not be - is volume.

On Friday, the 3 largest HUI Gold Bugs Index components, ABX, NEM & GG, all traded on extremely light volume.

ABX 6.5 million shares vs. 16.1 million average daily volume.
NEM 6.4 million shares vs. 10.7 million average daily volume.
GG 7.3 million shares vs. 14.1 million average daily volume.

And volume told the same story in GLD and the GDX:

GLD 11.5 million shares. vs. 20.4 million average daily volume.
GDX 4.9 million shares vs. 9.8 million average daily volume.

While the tape can tell lies, volume never does.

Take “some” profits off the table into the high volume gap up open days (or, buy some puts as insurance), when the mainstream funds and the momentum traders chase gold. And then use these low volume, blatant shakeout attempts to re-accumulate shares.

For active traders, these moves offer great day-trading opportunities for those so inclined. And as I type this… ABX, NEM, and GG are leading the GDX, each up +5-6% from this mornings gap down open.

Now that you know the “game” they’re playing… go out there and beat ‘em at it.

SliderOnTheBlack