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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 And Miners (GDX) (GDXJ) (NUGT) Should See Short-Term Top On Tuesday, February 18, 2014, While DUST Should Bottom. 11 comments
    Feb 15, 2014 5:20 PM | about stocks: GDX, NUGT, DUST, GDXJ, GLD

    On Thursday, February 13, 2014, I wrote an article where I predicted a top within two more days of trading in gold and the miners, click here. I am still holding to that prediction, and after a holiday on Monday, February 17, 2014, I am calling for a short-term top in both gold and the miners effective Tuesday, February 18, 2014. The implications of this is to now switch over from owning GDX, GDXJ and NUGT, to buying the leveraged short gold miner ETF (DUST).

    April Gold Is Poised For A Short-term Top on Tuesday, February 18, 2014

    (click to enlarge)

    The above daily chart of April 2014 gold futures shows how we had an 11 day rally back in October 2013. Then in late December 2013, we had a 10 day rally, then a 2 day selloff, followed by an 11 day rally, then a 5 day selloff, and now another 10 day rally that is up to date thru Friday, February 14, 2014. Either Friday or more likely Tuesday, the 11th day of the current up move, should be a temporary top, if history is a guide.

    Also I want to mention that I am predicting a selloff of $40 to $50 in gold, back towards the $1280 support area. For some time $1280 was resistance and now should become support. If gold should continue higher towards significant resistance in the $1350 to $1360 resistance area, then the initial correction may stop at the $1300 to $1310 area.

    Silver Had A Big Up Day On Friday

    (click to enlarge)

    On this daily chart of March Silver futures, I marked several large white Marubozu candles in silver, as "A" thru "I" with Friday being marked "I". You will notice that on Friday, silver exploded above resistance and closed quite strongly. On similar days in the past, especially when resistance was taken out, such as in "A", "B", "C", "D" and "G", silver sold off immediately or after another small day of rallying. Therefore, it appears that Tuesday, February 18, 2014 should be a miner up day with topping action and should then fall back, or Friday already was the top and Tuesday will begin the slide.

    The US Dollar Has Been Weak But Is Near Significant Support At 80.00

    (click to enlarge)

    If you check out the daily March 2014 US Dollar futures chart above, you will see how we have weakened over the last couple weeks, which has provided support to the gold market. However, we appear to be just a day away from hitting significant support at the 80.00 level that should cause a rebound in the dollar and help discourage any future rally for a few (or possibly several days) in gold.

    The Timing Is Right For The Gold Mining ETF (GDX) To Top Out This Coming Week

    (click to enlarge)

    On the above chart, I have marked from "A" through "F", several GDX rallies recently, with the current rally being marked as "F". The rallies marked as "B" and "C" look most like the current rally. The rally marked "B" occurred in August 2013, and had strong days on days 1-3, a correction day on day 4, and two strong days on days 5 and 6. From there we went sideways for just over a week and sold off. The rally marked as "C" had a 3 day rally as well, a down day on day 4, and strong days on day 5 & 6. During that rally, there was only a down day on day 7 and then small rallies on days 8-10 where we topped out at $26.66, just two cents lower than Friday's high of $26.68.

    On your own you can check out rallies "A", "D" and "E" and compare those to the current rally marked "F". With some variations, they also show that most of the current upward thrust should be exhausted and now it is a matter of doing the sideways consolidation and topping action, followed by a small or big correction.

    I also want to mention that Friday's DOJI pattern could be the beginning of a bearish morning star Japanese candlestick pattern if Tuesday immediately sells off. A similar pattern predicted a short-term top back on the first trading day of July 2013, the final trading day before the big selloff in late December 2013, and the final up day in October 2013, before another major selloff.

    Conclusion

    For all the reasons listed in this article, along with my previous article, I am quite comfortable with my current small position in DUST and intend to increase the position further if and when I see the selloff materializing as I am predicting this coming week. Like I did on Friday, I may scalp in NUGT for part of the day, but will primarily be playing for a move lower using DUST. Once we correct the current overbought situation, I plan to move back into NUGT.

    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 (11)
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  • John Tiwari
    , contributor
    Comments (8) | Send Message
     
    Excellent observations. In your last paragraph before "Conclusion", you mentioned "the final trading day before the big selloff in late December 2013". Do you mean December 2012 (actually Jan 2, 2013 - doji).
    16 Feb, 08:15 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (400) | Send Message
     
    Author’s reply » No, I meant December 2013. There was one in October and another in December.
    16 Feb, 12:22 PM Reply Like
  • Lumia_920
    , contributor
    Comments (76) | Send Message
     
    Great Robert. I sold NUGT and bought DUST on Friday too.What is your near term target?
    16 Feb, 12:06 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (400) | Send Message
     
    Author’s reply » My near-term target is to see a $40 to $50 correction off the high in gold and when gold corrects then I will look to get out of DUST, which should be in the $22 to $24 area or higher. Can't be too exact as we still are in the topping stage of gold and bottoming stage of DUST.

     

    There is an outside chance that GDX explodes straight up to $28, but I don't think it is too likely. If that did occur, DUST could fall to as low as $16.50 but then should pop back quickly to $22 to $24.

     

    On Friday NEM did a bearish hanging man Japanese candlestick pattern and other miners closed far off their highs and usually below their opening price, which also shows this rally is getting long in the tooth and will need to consolidate with a move lower shortly.
    16 Feb, 12:38 PM Reply Like
  • Gettin'Long
    , contributor
    Comments (133) | Send Message
     
    If we get a $40 move in gold, that's about 3%. Conservatively, the miners have been moving 3x gold, and the ETF is 3x leveraged, which you don't see all of. At a minimum, based on a $40 dollar move in gold, DUST should see $24. If you use a $50 move, with miners moving 4x since they have moved sharply and 2.8x for the ETF, you would get approximately a 40% move, or DUST at $28.
    16 Feb, 06:48 PM Reply Like
  • Lumia_920
    , contributor
    Comments (76) | Send Message
     
    Robert,

     

    Just to add, DUST average price is $21.59. I am expecting a bounce to $24 before $16. Would it be advisable to add more DUST at $16.00?
    16 Feb, 11:00 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (400) | Send Message
     
    Author’s reply » Whether DUST goes to $16 first or second, at those low prices, it should be a buy for a nice bounce, regardless.
    18 Feb, 09:12 AM Reply Like
  • Lumia_920
    , contributor
    Comments (76) | Send Message
     
    Thanks Robert. I see some bounce coming in this week.
    18 Feb, 09:44 PM Reply Like
  • losingbeta
    , contributor
    Comments (8) | Send Message
     
    yup. Looks like a pretty clear 5-wave impulse wave there that's on its last legs. So I'm shorting NUGT for the short term. But if we trend back up after a slight correction to ~$1280, then I suspect we'll find ourselves in the midst of an even larger Gold rally in the long term.
    17 Feb, 05:57 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (400) | Send Message
     
    Author’s reply » I agree that at $1280 in gold we should get a GDX & NUGT bounce along with gold. However, I do find it curious that the two best timers in the last couple years are still bearish gold for 2014. Click http://bloom.bg/1mqUfJj
    18 Feb, 09:13 AM Reply Like
  • Tradestrong
    , contributor
    Comments (22) | Send Message
     
    looking forward for your DGAZ UGAZ GDX GDXJ NUGT JNUG JDST analysis Robert.;)

     

    thank you so much. and all the best Mr Master.
    19 Feb, 06:30 PM Reply Like
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