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Robert Edwards
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Contrarian daytrading technician who specializes in locating high probability short term trades while predicting price movement directions with over 85% accuracy. Most of my trading involves either extremely short term micro scalping of stocks or commodities (using 1 minute bar charts), or swing... More
  • Gold Is Poised To Roll Over Friday 8/23/13, Or Monday 8/26/13 6 comments
    Aug 22, 2013 11:30 PM | about stocks: DUST, GDX, GLD, NUGT

    (click to enlarge)

    I previously wrote an instablog on July 21, 2013, that you can find here. In that article I explained how gold likes to top on the 9th trading day out of a low, then go sideways and then top on the 13th or 14th trading day.

    Looking at the above chart of December Gold Futures, you will see that we bottomed on the 5th trading day of August. Counting that as day "1" you will find that on the 9th trading day we topped out and have now traded sideways. Since Friday, August 23, 2013, is the 13th trading day since the recent bottom, and (if you read my previous article) you will know that we usually have a final top and roll over on the 13th or 14th day. I am writing late Thursday night and the small candle on the end is the Globex night session showing we are up slightly this evening. This bar will continue filling in as we trade on Friday and I am looking for a marginal new high top on Friday, and we should then turn down.

    What are the implications for DUST?

    If you have been following my DUST articles you would know that I am presently long the triple leveraged inverse ETF for gold miners called DUST, and feel that gold is on borrowed time on the current rally. If gold rolls over, GDX should follow and DUST should then boom. If gold breaks through to the upside instead, by Monday, then I would have to say I was wrong and give up on DUST. It will be fun to see what happens in the next couple days. The DUST chart follows and one can see how DUST is trying to bottom like it did the week of July 22, 2013.

    (click to enlarge)

    Disclosure: I am long DUST.

    Themes: Shorting Gold Futures Stocks: DUST, GDX, GLD, NUGT
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Comments (6)
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  • tanriseven
    , contributor
    Comments (9) | Send Message
     
    Waiting, and still trusting your insights.
    25 Aug 2013, 09:40 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (481) | Send Message
     
    Author’s reply » I might ultimately be proven wrong and I might be forced to take a loss. However, I believe I stand a very good chance to get my money back on this trade. I don't know if I will win or lose in the end, but if someone hopes to successfully play DUST, I would venture to say they have to play the way I am playing it. I sell a bit on rallies to free up cash to buy back more on dips without adding more funds. However, on an extreme low like would occur if DUST trades down to $18.50 to $20, odds favor adding to the position. If I am long 1000 shares of DUST under $20 then it is much easier to get my money back on the 600 shares bought at $30 as DUST does not have to rally much to achieve break even (23.75). Also, I have day traded part of my position every day and lowered my break even price that way as well, but I want to keep the day trading profits and break even based on the original purchase prices of $60 on 300 shares, which is now 600 shares at $30.
    25 Aug 2013, 10:25 AM Reply Like
  • glaserdx
    , contributor
    Comments (211) | Send Message
     
    Thank you Robert.
    I put in a bid for DUST. What do you think of also putting in a bid for NUGT in case gold miners continue their rally or if gold holds above 1,400?
    25 Aug 2013, 12:37 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (481) | Send Message
     
    Author’s reply » NUGT is a nice hedge and if you buy the dips in both and sell the rallies in both, you will make money. Both can be bought if you are smart about it. Since DUST has not shown a sign of bottoming yet, NUGT is even more attractive.
    25 Aug 2013, 01:29 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (481) | Send Message
     
    Author’s reply » Someone asked me about where to put a stop in DUST. I do not do stop losses on individual stocks. But instead I do account equity stop losses. I believe that stops do not serve any useful purpose except that they make you a loser. Having to hold out through a loss is punishment for bad trade choices and makes you a better trader in the future. You should not have all your money in one stock position, so if you still believe in a position, add on weakness. If you don't believe in the premise anymore, then get out. I am still in DUST because I have been making money in the Aussie Dollar and other markets that have exceeded my DUST losses. If my total equity falls enough then I will get out. If I am in need of stops then I know I am trading too big in one stock.

     

    Instead of stops, I found this as a better rule. The moment I see I am in trouble, that the position is making me sick in my gut, then I sell half my position at the market. Now, I add what I lost to the remaining shares I still own. If I have a 200 share position, and I sell 100 shares lets say with a dollar loss. Then I wait for a $2 rally to sell the remaining 100 shares to get my money back. If instead we continue to fall, then I find a place to buy the 100 shares back and I saved myself some pain and averaged down without having to commit more capital. If we rally some, I take profits on the bottom shares. Then I have a win/win. If we fall again, I buy the low 100 shares at a low price, averaging down again. If we continue to rally then I can take profits on the high shares and get my money back. If we fall low enough I might even buy 200 additional shares to really average down and any small rally makes me whole. Saying you have to place stops is the way the big guys take advantage of little guys. They run the stops just for kicks. They buy when you are getting stopped out. Most traders are not smart enough to place the stops at the right spot. Right now there is no way to know exactly where to place an intelligent stop, but by Tuesday or Wedn. this week, if I see a good spot, then I will try and comment to this comment and let others know what it is, and also post at StockTalk.
    25 Aug 2013, 02:51 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (481) | Send Message
     
    Author’s reply » Here is how I do my equity stop losses. I have two different methods, depending on whether or not I am in a good place or a bad place. Right now I am in a good place. That means I have recently made money and am in a good space. That is where I am now. So as I trade DUST, I am willing to risk 10 to 15% of my entire trading account. I will daytrade my position as I am currently doing and fight the good fight until I am down that 10 to 15%, which I am not so far.

     

    The other method involves what I do when I am in a bad place. While in a bad place, I recently took one large loss or a string of small losses and I am not a happy camper. My frustration level is high and I know I have to be conservative as losses are not profits and I am starting to eat into my working capital. I am now questioning why I even trade. My mind is not really clear and I may show signs of depression. When this occurs I stop all position trading and only scalp in and out quickly during the day, keeping nothing over night. I have a very tight stop loss of 1 to 1 1/2% of my equity on any day, and 3% for the week. When I restrict my trading I tend to only take the best trades and surprise, surprise, my equity starts improving again and in no time I am no longer in the bad place and I am in the good place where I can expand my equity losses to 10% to 15% of my account again.
    25 Aug 2013, 03:05 PM Reply Like
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