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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
  • Daily Trading Volume Figures Confirm Top In Gold On 2/18/14, While Weekly Trading Volume Figures Also Point To A Top Being Formed 3 comments
    Feb 22, 2014 10:33 PM | about stocks: GDX, NUGT, DUST, GDXJ, JNUG, JDST, GLD

    Anyone who has been following my blog knows how I predicted a top in gold and gold miners for Tuesday, 2/18/14, before it occurred, click here, and here. I then wrote two articles after 2/18/14, click here and here, where I explain why I feel Tuesday was a significant topping day of the current rally and why I want to still own the leveraged bearish gold mining ETF (NYSEARCA:DUST) in the short-term, (and despite the weak close on Friday).

    Michael Noonan's Article Hits The Bulls-Eye

    Today, there was an outstanding article written by Michael Noonan of Edge Trader Plus, click here. In the article, (you can skip the first 18 paragraphs of background fluff to get to the meat of the article: the charts), Michael Noonan discusses recent trading action in both gold and silver. He starts out with the weekly gold chart and notes that we have closed higher for three straight weeks, and the highest volume was this past week. However, April 2014 gold futures closed up only $4.90. The weekly range was only $21.50, ranging from a high of $1330.60, and a low of $1309.10. This is one of the tightest weekly ranges you will see in gold. With the increased volume, it means buy orders were met with an abundance of sell orders that prevented much progress to the upside. This could foretell trouble for bulls in the next couple weeks.

    Then Michael Noonan shows the April 2014 gold futures daily chart and reminds us that gold made higher lows for 12 days, and that 12th day (Tuesday, 2/18/14) had the greatest volume. That was the high for the week, as smart money was selling into the rally at $1330. He then covers silver and explains how silver also had a tight weekly range on very high volume, again making very little progress to the upside. On the daily chart, silver's high volume day as well as price day, came on (you guessed it), Tuesday 2/18/14. Mr. Noonan explains why the chart action of silver is much less constructive (bearish) than the gold chart, and feels that silver might lead the precious metals lower. Silver stopped rallying right where one would have expected it too, and has significant resistance here and a dollar higher.

    My Thoughts Going Forward

    Regarding gold, we completed an evening star doji pattern on the weekly chart this week. However, to confirm the pattern, next week has to be a long black candle formed by a move lower. That may occur or it may not. I believe it will. But even if I am wrong, there is more resistance at $1340 and again at $1360 to overcome and one of these levels should stop the gold rally dead in its tracks. Once gold hits resistance at $1330, $1340 or $1360, I will be playing for a $40 to $60 selloff and correction in the gold mining stocks, to levels I have mentioned in my previous blogs. From $1275 to $1290 in gold, I intend to switch back into NUGT for a retest of the highs that I anticipate will likely be taken out, as gold rallies up to $1400 and possibly higher.

    For the time being, I will continue to add to my DUST position on dips and continue to sell out partially on rallies, and am very confident that a decent sized DUST rally is right around the corner.

    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, JNUG, JDST, GLD
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Comments (3)
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  • Steven Couche
    , contributor
    Comments (278) | Send Message
     
    Mr. Edwards, I know nothing is certain, but would you mind giving a range for the decent sized DUST rally right around the corner.

     

    Also, I have a large options position expiring this week for DUST at 22. If we get a pop early in the week, would you recommend selling and rolling them into the next few weeks or do you think a big selloff this week could happen. Really, DUST moves about 10% on a 1% move in gold. A 2% move down would put those options nicely in the money.
    23 Feb 2014, 01:02 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (546) | Send Message
     
    Author’s reply » My previous 4 articles that I cited, give several targets for DUST. A move to $25 in GDX should bring a rally in DUST to $23.50 to $24, but using various Fibonacci retracement levels mentioned in the articles, we could rally as high as $29 in DUST if GDX would fall all the way back to support at $23.

     

    As far as timing is concerned, it is hard to predict the exact day a market is going to turn and I cannot tell you if the DUST rally occurs this coming week or the next at this time. However, I expect DUST to gain its footing starting at least by Tuesday of next week and we will have to wait and see how things pan out.
    23 Feb 2014, 01:23 AM Reply Like
  • Growfast
    , contributor
    Comments (278) | Send Message
     
    Thanks for the updated article, RE.

     

    Gettin' Long - Last week, I held put options on JNUG that went nicely into the money 2 different days. But, I kept thinking the bigger fall was there and held out for it. By the end of the week, the put options expired worthless.

     

    From my experience, when you get in the money during a week you are holding options that expire, take the money if you see a stall on the downside. Or, perhaps sell half of the position and hold the rest in case there is more downside.

     

    While I say all of the above, I think the probability we will have a bigger downside move this week is higher than it was last week.

     

    If your current positions are not too large and you have extra reserves you could dedicate to the position, you might consider going ahead and adding a longer-term position now. That way, you could sell out weekly options earlier for profit (assuming we do get downside movement to levels required) and, you are holding a position you can comfortably ride to see where the bottom of the fall will be with more time to work through the correction.
    23 Feb 2014, 11:49 AM Reply Like
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