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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
  • Miners And Gold Strong, But Soon To Hit Resistance 9 comments
    Feb 13, 2014 5:36 PM | about stocks: GDX, NUGT, DUST, GDXJ, GLD

    (click to enlarge)

    Gold Has A Higher Low For Ten Straight Days

    The above chart of April Gold Futures shows a higher low of the day for ten consecutive days, and the streak could continue. However, with a close above $1300 finally, it is likely we hit some resistance soon and finally have a $25 to $35 correction back to the $1270 to $1280 area shortly. Click here for a kitco.com article where Charlie Nedoss with LaSalle Futures Group, sees us falling back towards the 100-day moving average of $1271, if we don't continue the current run higher. If we can break $1308, gold could run to as high as $1350. But on a short-term basis, we are getting overbought and more probably will need to consolidate the gains before trying to move higher.

    GDX Is Approaching Strong Resistance of $26 to $26.50

    (click to enlarge)

    Looking at the above daily chart of GDX, one can see that we recently held support at $23 and have now approached $26. In my last article, click here, I indicated that it was too early to go short the miners using the leveraged ETF (NYSEARCA:DUST), and that if we should fall back $1 then it was a buy. Well, we fell back that $1 yesterday, and it was indeed a buy, as we rallied back today and made a marginal new high. The pattern we have seen in the last three days, is a pattern that has occurred in the recent past on other rallies, and I have marked them as "A", "B", and "C" on the chart. If we follow what happened these previous times, we should hit a short-term top in the miners within the next two trading sessions.

    If we follow what occurred in August 2013, marked "A" on the above chart, we would quickly thrust higher towards $28 before making a short-term top. If we follow what occurred back in October 2013, marked "B", then we could make a marginal new high to retest the October high of $26.66. If we follow January 2014 action, marked as "C", then $26.00 will probably contain the current rally. Of the three scenarios that I have identified, I favor "B" being the most likely outcome, with a possible rally by Monday of next week to $26.50 to $26.66 and then a sharp correction.

    Even though I bought NUGT heavily during the one-day selloff we got yesterday, I took profits a bit early and now have a small position in DUST, anticipating some two-way action as we hit resistance on a short-term basis in both gold and the miners. I will only buy NUGT to balance out the DUST position if it appears we are strongly thrusting through resistance in the $26.50 to $26.66 area on our way to $28.00. Otherwise, I will try to play the short-term countertrend move lower using DUST.

    Disclaimer:

    The thoughts and opinions in this article, along with all stock talk posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.

    Disclosure: I am long DUST.

    Stocks: GDX, NUGT, DUST, GDXJ, GLD
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Comments (9)
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  • Steven Couche
    , contributor
    Comments (284) | Send Message
     
    I own a ton of gold mining stocks and have been buying strongly the last year, but we have seen a very sharp rally and extreme turn of sentiment. I have to imagine we need a pullback here. I'll join you on this...if we rally, it'll limit my gains, but if we get the pullback, you call roll the DUST profits into your favorite miner.

     

    Thanks.
    13 Feb 2014, 06:28 PM Reply Like
  • Growfast
    , contributor
    Comments (278) | Send Message
     
    RE - Agree with you and Getting long. I am positioned with a few puts on GDXJ and JNUG to see if I can catch the pullback. On the pullback, I will be looking for the return to the long positions. Like you, I think this bull is continuing, we'll just need a normal technical correction because of the big move before making the next big move.

     

    Thank you again for another good article and analysis.
    13 Feb 2014, 06:35 PM Reply Like
  • Steven Couche
    , contributor
    Comments (284) | Send Message
     
    I know you mentioned a 25-35 dollar downside move w/ gold, what would you see with GDX? and even GDXJ if you can?
    13 Feb 2014, 06:45 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (563) | Send Message
     
    Author’s reply » It is hard to project a low because neither has topped out yet in the miners, but both GDX & GXJ could fall $1 in a day and at least $2 but as much as $3 in a week, if they would top out.
    13 Feb 2014, 09:01 PM Reply Like
  • Tradestrong
    , contributor
    Comments (22) | Send Message
     
    thank you for sharing the knowledge Robert. you always give the best analysis. thank you again. ;)
    13 Feb 2014, 11:26 PM Reply Like
  • Steven Couche
    , contributor
    Comments (284) | Send Message
     
    Do we wait till $1350 now as of the morning?
    14 Feb 2014, 07:09 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (563) | Send Message
     
    Author’s reply » Should top out in next two days which is Friday and Monday. Gold could go straight up to $1350 by Monday but that would be a stretch. More likely it stops at $1325 area I would guess.
    14 Feb 2014, 09:21 AM Reply Like
  • Steven Couche
    , contributor
    Comments (284) | Send Message
     
    Regardless of where it tops though, you are looking for a pullback starting in the next day or two? Sorry, just trying to get some clarification.
    14 Feb 2014, 09:28 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (563) | Send Message
     
    Author’s reply » Yes, looking for a pullback by Monday, regardless.
    14 Feb 2014, 09:34 AM Reply Like
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