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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 (GDX, GDXJ, NUGT, JNUG) Are Rolling Over Along With Gold 9 comments
    Feb 25, 2014 10:09 PM | about stocks: GDX, NUGT, DUST, GLD, GDXJ

    (click to enlarge)

    The above daily chart of April 2014 Gold Futures is up to date, including the small black candle all the way to the right which is the slightly lower evening price action on tonight's Globex. It appears that gold is finally hitting resistance at just above the $1340 area, just over $100 from the recent $1240 support area. For over 3 weeks gold has rallied virtually straight up, in what I would classify as a helium balloon market (see my article posted here for an explanation). During a helium balloon market you stay long, watching for a long black warning candle. I believe that warning candle occurred 5 trading days ago on February 19, 2014. The reason it does not appear as a long black candle on the chart, and more like a hammer just barely closing down for the day, is because the chart reflects closing prices at 1:30 p.m. EST and not prices from the close of the day's trading session. If you read my balloon theory article, then you would know that after this warning candle, the market should top out 3 to 4 days later. Well, today, Tuesday, 02/25/14, would be the 4th trading day following the warning candle, and one should have taken profits on any gold longs today, according to my theory.

    The mining stocks are already slipping a bit and in the last hour of trading today, the gold mining ETF (NYSEARCA:GDX) sold off and made a new low of the day, closing near the lows. The miners lead us higher and now appear to be leading us lower. Just take a look at the current GDX daily chart as follows:

    (click to enlarge)

    Today's lower close in GDX is the lowest close of the last three trading days. Last week GDX topped at $26.68 and then fell hard to the $25.50 area, in a similar looking chart as today. However, after rallying big the next day last week and setting a marginal new high last Thursday, GDX has made very little progress to the upside and has stopped at $26.96 and rolled over. Today's close was $26.33, and anticipate GDX will now roll on over along with gold. The first target is $25 and it could drop all the way back to the $23 support area, totally retracing the strength that has been seen in the miners over the past couple weeks. Now please take a look at the triple leveraged bearish gold mining ETF (NYSEARCA:DUST) chart as follows:

    (click to enlarge)

    Last week we got one close above the 4 day moving average shown in the above chart as the blue line. But then we rolled back over and made a marginal new low in DUST. Well, today we made a second close above the 4 day moving average blue line. It is this second attempt during down trends that are usually successfully in starting a further rally that challenges and overtakes the 9 day moving average, shown as a red line in the above chart. The 9 day moving average is presently at $20.59 and so it constitutes the first target for DUST, and I am hopeful that tomorrow we can not only hit this first target, but that we can rally to at least $21, where I plan to take some profits in the DUST shares that I have accumulated in the past week. If we could get some momentum to the downside in GDX and especially in gold, GDX is vulnerable for a $2 or 8% selloff, which translates to a 24% rally in DUST, to about $24.60.

    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, GLD, GDXJ
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Comments (9)
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  • sundate36
    , contributor
    Comments (291) | Send Message
     
    Thanks for the update!
    25 Feb 2014, 11:08 PM Reply Like
  • Growfast
    , contributor
    Comments (276) | Send Message
     
    Looking like you may get that chance this am for selling some of your DUST profitably. Thanks for the update.
    26 Feb 2014, 08:23 AM Reply Like
  • Lefty6x6
    , contributor
    Comments (52) | Send Message
     
    look at them yo-yo's...that's the way we do it.....money for nuthin', and your chicks for free....
    26 Feb 2014, 09:14 AM Reply Like
  • Lumia_920
    , contributor
    Comments (100) | Send Message
     
    Dear Robert,

     

    DUST did touched $21 couple of times,did you sold ?

     

    I am still holding at $21.50 level and looking for $23 PT.

     

    We could see 2% drop in gold price before moving any higher. I am positive about it but you never know.
    27 Feb 2014, 09:31 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (489) | Send Message
     
    Author’s reply » I sold 2/3rds of the position I was holding in DUST into that 21.00 are high. I bought scalped some in DUST today and also bought some on the close in anticipation of more DUST strength in the near future.
    28 Feb 2014, 12:25 AM Reply Like
  • Lumia_920
    , contributor
    Comments (100) | Send Message
     
    Thanks Robert.

     

    I hope to see a market correction of 10% in near future. In that scenario,gold price would go up and might touch $1,400.

     

    I might get rid of DUST before it happens. Next week looks unpredictable .
    2 Mar 2014, 02:26 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (489) | Send Message
     
    Author’s reply » I sold out of my DUST position on strength above 21.00 on Friday, but managed to buy back 425 shares in the aftermarket. I see a possible gold rally due to the Ukraine situation, early in the week that could rally the miners into their recent resistance and cause DUST to sell off some. However, I do plan to buy DUST into that dip, as I see it now. I will see how strong gold can rally since traders will also be buying the US Dollar and dollar strength is a depressant on gold usually. If we get a stock market selloff on Monday, it could spill over to the miners and allow me to take my few shares of DUST off at a profit. Will be interesting to watch.
    2 Mar 2014, 05:05 PM Reply Like
  • Qmique
    , contributor
    Comment (1) | Send Message
     
    For Rockies likes myself, do u have any suggestions? I hold some $dust @ 20.68 cost basis. Very Upset for the coming Monday.
    2 Mar 2014, 09:12 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (489) | Send Message
     
    Author’s reply » You should be fine in the long-term but may suffer a bit of a drawdown on Monday. However, I believe there is significant resistance in the gold metal at $1350 and $1360 in April gold futures, and it will be hard for GDX to take our $27 and extremely hard to overcome $28. Once resistance is hit, I would expect a quick retreat of $2 to $3 in GDX, which should pop DUST towards $24 and eventually much higher.
    2 Mar 2014, 10:56 PM Reply Like
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