Seeking Alpha

Technician sees bottoming action in precious metals

  • "The bottom line is that several factors, including chart patterns, sentiment and momentum indicators show signs of life for both (precious) metals and metals mining stocks," writes technician Michael Kahn.
  • He notes the GLD - bottoming last month at about the same level as it did in June ($115, or $1,180 per ounce for gold) - is beginning to form a double-bottom chart pattern, though there remains a ways to go before this would be confirmed. The iShares Silver Trust (SLV) is showing a similar formation.
  • The GDX is notable for a bullish divergence in which the relative strength index rises even as the price action makes lower lows - "the first sign that the bears have lost their power."
  • "Resilience last week in the face of a rallying U.S. dollar shows that there were forces supporting gold other than simple currency factors."
  • Gold and silver ETFs: GLD, SLV, IAU, AGQ, PHYS, SIVR, USLV, ZSL, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, DSLV, DBS, DGZ, AGOL, GLDI, DGLD, SLVO, TBAR, USV, UBG
  • Gold miner ETFs: GDX, GDXJ, NUGT, DUST, GLDX, RING, GGGG, JNUG, PSAU, JDST
Comments (33)
  • Bravo Seeking Alpha!

     

    Long NUGT again for a trade. Assuming of course the above is correct.

     

    Always have stops.
    7 Jan, 11:38 AM Reply Like
  • 20 day breakout with three day low entry rule. We will see if this works or goes to new lows.
    7 Jan, 11:45 AM Reply Like
  • I could be a bit early. In at $29.21. Half shares.
    7 Jan, 11:54 AM Reply Like
  • Got out of NUGT at $21.69. News story out of Fed's Williams saying QE will end in 2014. I don't believe it of course, but my guess is the market will.

     

    http://bit.ly/1aEOxso

     

    Will wait for another trade soon enough.

     

    Funny how the Fed guys name is John Williams and the perennial hyperinflation guy from ShadowStats is also named John Williams.
    7 Jan, 02:31 PM Reply Like
  • I guess it's a non-event. But hey, profit is profit.

     

    NUGT @ $30.24 now.
    7 Jan, 03:28 PM Reply Like
  • Not sure of in and outs. I entered at 29.13. Unless it looks like much lower is in the cards I will hold on for the near term.

     

    Williams .. Somebody needs to add an initial or something. Thanks for the laugh.
    7 Jan, 05:22 PM Reply Like
  • To be honest, I did see that news and bailed and at the same time, I'm in a kind of log cabin writing my next book and really shouldn't be trading right now. I just took some profit so I would stop watching and have to concentrate on getting this book finished as I know it will be at least 2 more months of solid work to get it to the editor.

     

    My only distractions are birds, squirrel's and trading. I think I'll stick with nature for a bit!

     

    Nice trading...and I meant $29.69 above, lol
    7 Jan, 07:11 PM Reply Like
  • You get out with some profit pre-market 615, or holding for further uptrend?

     

    Silver broke to newer Jan. low I see. We'll see if gold follows.

     

    Dollar got a boost today (as you may know I am dollar bullish).

     

    Still think we move higher in January for gold.

     

    We'll see.
    8 Jan, 11:15 AM Reply Like
  • I'm not jumping out yet but the gold action is a little disturbing. I'd say we will retest the "flash crash" levels in gold. The big risk I see is the FED minutes due pretty soon. I'm still in the money but not really. I don't mind losing some (risk) to possibly make more. If GDX breaks 21 then I plan to exit my NUGT.
    8 Jan, 01:20 PM Reply Like
  • Fed meeting will have the language that is negative for gold in my opinion. That's what they do best, like with Williams recent "end taper by end of 2014" comment.

     

    Good you have stops. Typically these can swing both ways quickly.
    8 Jan, 01:31 PM Reply Like
  • The FED minutes seem to be an nonevent for gold futures which I take as slightly positive especially when they indicate more tapering.

     

    Good call on the Dollar index! Only a little more to go to breakout above Nov Highs.
    8 Jan, 03:26 PM Reply Like
  • Not much happening. Up and down. I won't play it either way just yet, but I am supposed to be writing, lol.
    8 Jan, 03:49 PM Reply Like
  • Upon further review, I am back in NUGT at $29.30 after hours, but even smaller shares.
    8 Jan, 05:12 PM Reply Like
  • Got out pre-market at $29.04 - didn't like the price action after the numbers came out. Again, this was even smaller shares.
    9 Jan, 09:42 AM Reply Like
  • I sort of see what you mean on action but since I'm more watching the 12/31 to 1/2 gap in GDX, I'm still holding for now but getting more skeptical, it's going to work. We found support at 12/26 highs and so it's still well with in may trade expectations.
    9 Jan, 12:27 PM Reply Like
  • I reduced my exposure as conviction has waned after 3 day volatility and yesterday's significant underperformance to gold or GG. Cut in half at 30.45. I'll hold on to the remainder for at least 3 more trade days or exit stop loss level.
    10 Jan, 02:51 PM Reply Like
  • Cool. I got in and out today for a scalp is all. Nothing to brag about. Made up for more than my little loss the other day.

     

    Yeah, hard to read right now. In a zone. Practicing patience.

     

    Good luck!
    10 Jan, 03:19 PM Reply Like
  • I am still seeing it in a downtrend channel. Not saying it won't break that channel, but I am going to wait until I see more evidence of basing.
    7 Jan, 11:43 AM Reply Like
  • Sold long dated way out of the money calls and puts on GLD...
    7 Jan, 11:54 AM Reply Like
  • bbro:

     

    Just curious....

     

    Are those covered or naked calls?

     

    How long is long-dated?

     

    So, you're betting on range-bound activity?
    7 Jan, 12:04 PM Reply Like
  • They are December 2013 160 calls and 95 puts...currently the 160 call has a 12% probability of touching
    the 95 put has a 26% chance...
    7 Jan, 12:21 PM Reply Like
  • bbro:

     

    FWIW, I like the put side of that play a lot better than the call side. On the put side the worst that can happen is you get GLD shares cheaply, and you get to pocket the premium. The call side could get dicey, especially if the calls are naked, and all just for the premium income.

     

    What's your own view?
    7 Jan, 12:28 PM Reply Like
  • 2013?
    7 Jan, 12:45 PM Reply Like
  • Oh wow...no wonder i got no premium on the trade :)
    7 Jan, 12:56 PM Reply Like
  • bbro-do you mean the DEC 2014 options?
    I generally like this type of strangle, especially with commodities. The crux of the planning is to pick wide ranges, and still garner enough premium to adjust for risk. The question is not where the price is headed, but to pick unlikely points as to where it won't go. That said, gold has dropped like an anchor, and the short calls could increasingly approach a higher delta. At a point, the put premium will not be able to compensate.
    Consider: adding further OTM long calls to close exposure, such that the short put premium + short call premium - the long call cost still provides a suitable risk/reward. You don't have to necessarily add long calls at 1:1, and it's possible to adjust 'as time goes by.'
    7 Jan, 01:14 PM Reply Like
  • Thanks...a move to be in the money for both strikes would require a 33% up move or a 20%
    down move for the end of the year 2014....always possible but unlikely....
    7 Jan, 01:32 PM Reply Like
  • Since we are in mid business cycle and we have experienced a large move in equities and a contrasting
    move in Gold last year I do not expect a similar joint move this year...also I tend to like to sell OTM options with
    a sub 35% probability...I would not do this fun and games if I thought we were near the end of cycle up
    or down....sound confusing??
    7 Jan, 12:37 PM Reply Like
  • bbro:

     

    Well, if we were near end of cycle, one would pick one side of the trade or the other.

     

    But, I am still wondering if you're selling naked calls, which has decided risks, anytime. One black swan and poof.
    7 Jan, 12:43 PM Reply Like
  • Yes they are buck naked...but trust me the trade is a very small % of the portfolio....so a move above 160 in GLD would cause little harm however if we are at 160 it likely means we have had a significant equity selloff which would hurt me a lot more....
    7 Jan, 12:55 PM Reply Like
  • my estimates for the fair value price for #gold #gld $gld - http://goo.gl/m2V8Y5
    7 Jan, 01:49 PM Reply Like
  • This headline comment by Michael Kahn, mentioning double bottom, bullish divergence, and what else, the several factors showing signs of life....... gee whiz..... let me tell you something. as someone invested in a gazillion miners, most all bought at 2010/2011/and 2012 'bottoms', and who watches price action in miners and metals closely every day, The charts of almost all miners and precious metals is a total disaster, still ongoing. still wallowing at bottom zone levels, and almost all charts show the same Hideously Bearish pattern, with the key moving averages, 200 and 50,(daily charts) forming a big downtrend channel of Doom, waiting overhead now, for the short attackers to make their next move to slam down metals and miners.
    This game has been ongoing for 14 months non stop. The charts are so shattered and collapsed that it will take a herculean effort for metals and miners , to make several rallies of higher highs and higher lows, just to Begin to recover.
    The small rally that happened in the last 2 weeks is so small that you can barely see it in the weekly charts. and the daily charts are showing the miners already entering the next short attack zone, waiting for the sheeple to get suckered back in so they get hammered all over again.

     

    Just watch what happens if miners rally a little higher in the next few days.

     

    This is a Grande Downtrend channel of Doom, and miners are entering that attack zone now.

     

    GDX should get Hammered hard around 23, and later around 25.

     

    This game is far from over.
    8 Jan, 01:13 AM Reply Like
  • IN SILVER PHYZZ I TRUST IN BANK$T€R$ I NEVER TRUST
    8 Jan, 02:57 AM Reply Like
  • I wrote specifically about this double bottom in pretty good detail in my Dec 19 article just before it occurred. I had first thought the double bottom may have occurred on Dec 3. My article came out the same day as the Dec 19 low.

     

    http://bit.ly/1hsyYcd
    11 Jan, 11:56 PM Reply Like
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