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Robert Edwards
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Contrarian daytrading technician who specializes in micro scalping of stocks (using 1 minute bar charts), swing trading of stocks overnight, weekly stock option premium selling, pre-market and post-market psuedo market maker and stealth trading activity, and selling commodity option strangles... More
  • Beginning Friday, June 28, 2013, Time To Go Long Gold  3 comments
    Jun 27, 2013 11:20 PM | about stocks: GLD

    In April of this year, gold suffered a big "smackdown" with the major selloff occurring in two weeks of relentless selling. August gold futures then bottomed at $1321, and it was time to switch to the long side where one could benefit from a $166 short covering bounce to $1487. Then came a retest of the lows that initially held. But when gold could not get any traction back above $1400, it started another "smackdown" lower. As we approach Friday, June 28th, we have fallen hard for another two weeks straight with hardly any bounce. Bulls have been devastated. Initially support held at $1220, but late today, gold broke down through $1,200, running stops. The selling continued through the early night session as August gold hit the $1180 support target and bounced. Peter Hug at Kitco thought $1220 would hold support, but if it did not, then $1,180 would. So far, he is right on the money. Gold just bottomed at $1,180 and is now trading back above $1,200.

    It Is Time To Play Gold Again From The Long Side But Play Small

    Running the stops today and tonight under $1200, and then bouncing, tells me that gold is in a bottoming process and one can now safely catch the falling knife and go long using mini or micro contracts unless one is extremely well capitalized. Even if we should sell off more over the next few days, down to $1150 or even $1100, by playing very small size, one can play for the big bounce that should begin at any moment. The April selloff lasted 2 weeks and this June selloff is now 2 weeks long as well. Being the end of the quarter, lots of money managers surely bailed out of GLD and GDX along with the miners, adding to the bearishness, as they did not want to be caught long anything in this sector when the quarterly positions are reported. Thus, we should start correcting back up next week, as it will be safe for money managers to buy back into this sector to take advantage of rock bottom prices and they will have a whole quarter before the next position reports go out. Again play very small size and be prepared to hold through a selloff down $200 to $1000. If your account can't handle another $200 selloff without going into margin call, then you are playing too big. I bought into tonight's weakness and am feeling really good about the trade. I am not giving advice for others to buy, only telling how and why I have now taken a long position in gold futures and will be playing the long side for the time being. I will update in the comments section how things progress.

    Stocks: GLD
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  • Robert Edwards
    , contributor
    Comments (587) | Send Message
    Author’s reply » It is no wonder that we stopped falling at $1200 in gold as that corresponds to a Fibonacci 38% correction from the all-time high in gold. After we rally back to $1300 to $1350 on a correction, we should return to $1200 for a retest. It may hold the first time but ultimately it will likely fail and fall to $1000 which is closer to a 50% Fibonacci correction level. If we get a correction similar to what happened following the 1980 high, we would approach an ultimate low of $700 to $750. For now, we should bottom at $1180, $1100, $1050 and/or $1000 and so the worst of the gold sell off is behind us. When we can retake $1400 then the bottom will be in and another bull market should begin in earnest. The second quarter was the worst sell off in gold since 1971, which is 42 years ago. Since I am 57, I doubt that I will ever see such carnage again in my lifetime. I did not go short to take advantage of the fall since my wife freaked out anytime I casually mentioned I was short gold. She now freaks out anytime I mention I am long gold, so it is surely time to buy now and on all future dips.
    29 Jun 2013, 04:35 PM Reply Like
  • Brian Teeney
    , contributor
    Comments (33) | Send Message
    The freaking out wife has got to be one of the best contrarian indicators ever!
    29 Jun 2013, 05:16 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (587) | Send Message
    Author’s reply » The Thursday night globex trade is part of Friday's trade, so the Friday low of just under 1180 to the high of Monday, just under 1262 in August gold futures means we got a 82 dollar correction back up from one day's low to the next trading day's high. Pretty amazing! I would now like to get a quick retest to something close to 1200 so I can buy back in and play for a move on towards 1300.
    1 Jul 2013, 10:34 PM Reply Like
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