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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
  • I Am Calling The Market's Bluff. I Refuse To Fold And Sell Out My GDX/NUGT/NEM In A Hole 14 comments
    Nov 25, 2013 7:22 AM | about stocks: GDX, NUGT, NEM, DUST, GLD

    Overnight at about 1:00 a.m. a single large order came in well over 1000 contracts and killed the gold market. Gold immediately dropped over $10 to $1226.40 and trading was halted for 10 seconds. When trading resumed, we were back above $1230 and stayed above there until a later morning retest in the 1227s but again bounced. I believe the reason there is no follow thru to the downside, is because this single order does not reflect the true sentiment out there of traders. Even with the sentiment as bearish as it is, gold is stubbornly being crammed lower by single large orders usually hit overnight during the Globex session when trading is as thin as possible and large sell orders can have the most impact.

    Money Goes From Weak Hands To Strong Hands

    They say that if you are in a poker game and you look around and you can't spot the "patsy" then you are it! In trading, money goes from weak hands to strong hands. Strong hands are the ones who wait thru adversity to sell. They never dump at the bottom. They wait for a better price, even if they are ultimately forced to take a loss. Are you strong hands or weak? It is your choice.

    If you look at every single major low in GDX and the various individual mining companies, when a bottom is reached, there is a rally of $4 or $5 that quickly follows. On the opening today, it looks like the nearly 5 year bottom in GDX that was scored on 6/26/13, will finally give way to lower prices. But how low? I just wrote an article, click here, showing how I feel that a new low of no more than 75 cents to $1.50 is in the cards. Suppose I am wrong and we fall all the way down to $20, and from the $66.11 high where we started, GDX falls over 70%, 2nd worst bear market of all times and worst than in 2008 during the financial crisis. Even at $20, a bounce of $4 to $5 will allow one to sell substantially higher than the sub $22 prices where we will likely open today. Everyone has to choose what they want to do, but I want to see GDX make a low that is worse than the 2008 low. I want to see GDX prove that it really is that weak. I am willing to call its bluff. I plan to ride thru the low so that I can sell after the $4 to $5 bounce which should be much higher than here.

    Conclusion

    I could be totally wrong of course. This time could be different. This could be the one black swan event where the past must be totally thrown out. However, the odds favor this not being that one black swan event. And if a person plays for that one black swan event, they are going to be wrong over 95% of the time. I choose to stay in because I feel I have over a 95% chance of being right to stick it out. When playing poker, there are times that the pot is so big, the stakes are so high, that it pays to play a weak hand that has a very low probability of hitting. We are in that situation now. Even if there was a very low probability of winning, it would pay to call to see the cards and know if we do have a winning hand or not. If it pays to keep playing with even poor odds, how much more when the odds strongly favor the bulls at these extreme low prices, extreme low sentiment, extreme oversold price action, etc. The only thing that assures a losing hand, that is 100% guaranteed a loser, is folding. I choose not to fold and to play out my cards. If I am wrong, then I lose. That is fine. Losing is part of the game. I will get them next time. But I will not throw away a winning hand and I will not beat myself by giving up too soon.

    Disclosure: I am long GDX.

    Additional disclosure: Also long NEM & NUGT

    Stocks: GDX, NUGT, NEM, DUST, GLD
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Comments (14)
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  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » Being a winner or loser in the markets, as in life, is not based on our fate. It is a matter of choice. In life, our success or failure is based on the choices we make. Same is true when trading. We can't blame others if we lack the confidence or discipline to hold through adversity. The difference between the winners and losers in life and in trading, is the way the parties handle adversity. The winners rise above. The losers give up. I choose to be a winner.
    25 Nov 2013, 07:43 AM Reply Like
  • njtoms
    , contributor
    Comments (22) | Send Message
     
    The Guy's Son who "bought thousands of GDX shares in the AH's" is Waking Up to a Really Bad Hangover this Morning. There's Poker Game Somewhere.
    25 Nov 2013, 08:26 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » My son added at 21.69 and 21.72 in today's premarket and his average price is now 21.89. He is a happy camper!
    25 Nov 2013, 09:04 AM Reply Like
  • gonetouring
    , contributor
    Comments (26) | Send Message
     
    RE: I remain convinced that gold will be slammed down by large vested parties until 11/27 to close off Dec futures contract on Comex - and hopefully will rally from 29th onwards (not be pushed down further...)
    25 Nov 2013, 08:38 AM Reply Like
  • rodh7858
    , contributor
    Comments (138) | Send Message
     
    Hi Rob: How do options expiration today in gold affect prices? Also I read CME lowered margin requirement for gold starting today. What are its impacts?
    25 Nov 2013, 08:50 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » The margin lowering took effect last Friday. Bullish sign because if the CME was worried about falling thru 1180 support in gold, they would have never lowered margins. Options expiration today means we should probably stay below 1250 so those calls go off worthless. However, Tuesday I am looking for a $20 to $30 snap back rally in gold, as the current weakness was probably just to make the call buyers losers.
    25 Nov 2013, 08:54 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » Within 30 minutes of the 1:30 New York Gold close when the options expired worthless, gold popped to a new high of the day towards 1280 in Feb. gold. If it should continue moving higher over 1251 resistance that used to be support, it would be very constructive.
    25 Nov 2013, 02:40 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » GDX falls twice as much as gold does. Buying GDX in this area means you buy at a major discount, getting much lower price than you deserve based on the gold metal price. When gold turns around, GDX rallies twice as fast, and if gold only comes back 50% to the spot where you bot GDX, you should be broke even. This situation makes buying GDX a great opportunity long-term, even if gold is in an entrenched downtrend. One should have no problem getting out on rallies.
    25 Nov 2013, 09:13 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » Who would sell over 1000 one hundred ounce gold contracts in the wee hours of the morning when there is no liquidity? If the person wanted to get a good price, they would sell small increments when there is high liquidity, on an opening or close. Selling at the low liquidity time all at once can only be done for one purpose, to try and manipulate the price lower. There is no other explanation. However, long-term the strategy will not work, and it shows desperation. This is a continuation of the selling that occurred mysteriously last Wednesday. Someone is desperate to see gold lower. What this means is that gold is artificially trading lower than it would otherwise, and at some point the true value will be realized....higher prices. The sad thing is that many will have given up and taken their loss and will not benefit from the higher prices.
    25 Nov 2013, 09:25 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » NEM is trying to form a hammer from new lows today. That would be very constructive. If it is like the hammer of 7/10/13, we bottomed today, Monday, 11/25/13. If the hammer today is like the hammer NEM made from new lows on 10/09/13, we could bottom 4 days from now, after we make another new low 48 cents lower than today's low of 24.68. Either way a hammer is very encouraging if it occurs.
    25 Nov 2013, 02:42 PM Reply Like
  • 8665091
    , contributor
    Comments (3) | Send Message
     
    HI Rob, I'm long 14,000 shares of GDX at a cost basis of 23.90 and long 1000 shares of GDXJ at 37. I'm definitely feeling A LOT of pain at the moment. I wrote some medium term covered calls to help offset some losses but closed those positions today for some gain. I like your faith and belief in GDX. Everyday it seems like it's going down regardless if gold is up or down, market is up or down, dollar is up or down. It's really weird. All the miners are getting slammed for several days now. Technically, it is at an oversold state, but for how long more? I will hold until my breakeven. But I feel more pain is ahead.
    25 Nov 2013, 08:17 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » Today's action provides hints that relief is in sight. I will do an article this evening explaining my latest thoughts. Check back and in a couple hours and I will have it posted.
    25 Nov 2013, 08:23 PM Reply Like
  • Rain Man 1
    , contributor
    Comments (5) | Send Message
     
    It's hurting that's for sure. What kills me is that I sold dust the week gold spiked about a month ago right after Goldman said gold was a slam dunk sell, then gold took off. If I would have sat tight instead of a loss selling at 28 I'd be loving it because it's now at 45. Instead I bought $JNUG and have been destroyed. I know as soon as I sell it will go to the moon. I'm at a loss for words.
    25 Nov 2013, 10:01 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (413) | Send Message
     
    Author’s reply » The triple leveraged ETFs are so unforgiving. I have concluded that they may not be tradable. But if they are tradable, one must only buy the ETF that is super cheap and try to catch a turn. Getting in the strong ETF that is high priced, just kills you when it turns down.
    25 Nov 2013, 10:49 PM Reply Like
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