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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
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  • Has Crude Oil Bottomed And Where Is It Going Next?

    I just saw a great video on Bloomberg TV located here, where Greg Smith gives his outlook for crude oil and other commodities. Mr. Smith gives some fundamental reasons why crude oil and gold should rally in the short-term. Unfortunately fundamentals do not help traders time the markets very well, so for that we look at technicals. So here is the current daily chart of October Crude Oil:

    You will notice that in 3 days, crude oil popped 27% out of the bottom. This is a generational move, that you will only see once in a generation, or longer. On Friday, August 28, 2015, I was saying that one should wait until Monday before buying any DWTI or playing any other bearish derivative figuring that there would be a 3 day upward thrust and not 2. In my Weekend Newsletter, I mentioned how Monday should be a blowoff top, with weakness to follow. I was looking for a great buying opportunity after the crude inventory report is announced on Wednesday September 2, 2015.

    Instead of opening strong on Monday as I had expected, crude oil started out Monday weak. This allowed several of our traders in our WeChat room to buy the triple leveraged UWTI for a nice scalp. Crude oil reversed higher and soon exploded to just shy of $50. Monday was indeed a temporary top, and Tuesday, September 1st, crude was quite weak. In our private WeChat room, I mentioned how one wanted to buy UWTI at $1.05 and to scale in every few cents lower. When Tuesday's API Crude Stocks number was a $7.6 million rather than a 0.8 million barrel decrease, crude oil sold off hard and traders were able to get long UWTI at $1.05. Then Wednesday morning early, crude oil recovered nicely and traders could take nice profits in UWTI. I mentioned early on that day, that crude oil could show us something when it traded at $43.25 to $43.50. Well, at 10:30 a.m. EST when the crude oil report came out, 4.3 million barrels heavy, October Crude oil futures sold off to score a low of $43.21, right in my buy zone. I bought UWTI at $1.00 and other traders bought as low as 99 cents. I took a quick dime (10% gain) but UWTI would climb much higher. Most others held for much larger gains. I was correct in predicting a Wednesday post inventory report weekly low, but did not anticipate how strongly crude would rebound the same day we saw a very negative (fundamentally speaking) inventory report.

    When we came into Thursday, I mentioned how $46.35 was the pivot point. If we can move above this point, crude oil is a buy. So when crude began moving up over $47, I mentioned in our private WeChat room to expect to see a rally to $48.50. Crude topped out at $48.42. Lucky guess again. It then retreated back into the $46s.

    For Friday, September 4, 2015, I am looking for a bit more weakness, at least early on, and plan to use that weakness to pick up some triple leveraged UWTI and/or triple leveraged ERX. I now see support in the $43 to $44 level, with extreme support at $41.50. After bottoming again on Friday, I anticipate a further rally early next week to a higher high above $50, with the potential to approach as high as $54.00 over the next couple weeks. I will be able to fine tune my price predictions as we complete each day of trading.

    Summary

    Have we bottomed in crude oil? Absolutely. Is it the ultimate bottom. Probably. In any case, all dips should be buys for the next 4 to 8 weeks if not the next several years. Energy stocks have been beaten to a pulp and are screaming values. With the overall stock market still dicey thanks to China jitters, I see great safety in trading energy stocks. Petrobras (NYSE:PBR) is extremely cheap, trading under $6, but has weak Brazil currency and stock market risk. They have taken out and shot most emerging market stocks. A safer bet is ERX and you can't go wrong buying UWTI under $1, especially if you scale in buy. When they do the (1 for 10) reverse split and UWTI is trading around $10, a penny move will be 1/10th of a percent. Right now a penny move is a 1% move when trading at $1. I prefer only having a tenth of a percent gap between the bid and ask, than an entire percent.

    Right now, crude oil is the big mover and correctly timing this market can be extremely rewarding. However, even if one cannot time it, buying unleveraged energy stocks when crude oil is trading under $50, and holding onto them until crude is trading at $65 or $70 or more, should pay off handsomely. Just remember, the longer they keep crude oil under $50, or better yet $40, the greater the rebound to follow. OPEC and especially Saudi Arabia, may regret that they got the world hooked on cheap crude. More crude will be consumed at $50 than at $100. China will speed up in their accumulation of automobiles. Crude oil will also be consumed at the expense of alternative fuels. If we stay this low for a year, I would not be surprised to see crude spring back to $200. Many were impressed by a 27% rise in 3 days. How about 100% in 3 days, and 200% in a couple weeks? Saudi Arabia, you have been warned!

    To follow along as we buy ERX or crude futures, as well as GLD, GDX, IAG, KGC or other mining stocks, or trade crude oil (UWTI and DWTI), natural gas (UGAZ and DGAZ) and other commodities, join us in our private Short Bull Trading Room on WeChat. Just download the free app on your phone or tablet, and then add "bobed1". You can then send me a message so I can invite you into the room. Still plenty of room.

    You can also subscribe to my free weekly newsletter. Send an email to shortbull2020@yahoo.com if interested in subscribing. Again, it is free!

    Disclaimer:

    The thoughts and opinions in this article, along with all STOCKTALK 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.

    Tags: UWTI, ERX
    Sep 04 1:43 AM | Link | Comment!
  • The Stock Market Is Not The Only Ugly Looking Chart Action, Just Check Out Gold!

    Stocks

    On Tuesday March 25, 2015, the stock market completed a 5 day selloff for the record books. The above December Dow Jones E-mini Futures had a trading range to the downside of over 2200 points at the lowest point on Monday. But the worst part was the volatility. Rarely do you see moves up and down of 100 to 200 points in the Dow, every 5 to 10 minutes. How bad is this market? Well, you may be surprised to know that the RSI (Relative Strength Index) on the daily chart of the Dow Jones Industrial Average ETF (NYSEARCA:DIA) is lower now than at any time in 2008? Back then the RSI never fell under 19, while recently I saw a 16 reading. Extremely oversold.

    Well, we had the 1100+ point drop on Monday but the Dow Futures "only" closed down 747 points (the futures slipped more than the cash index as traders priced in even more carnage for Tuesday). But on Tuesday the Dow Jones futures were up over 600 points early (500 points in cash). But the rally never held and the cash market closed down over 100 points, while the Dow futures closed up 10 points. Indeed, these are not normal times. Looking back over the charts I saw several instances when you get a "Gravestone Marker Doji pattern" like we saw on Tuesday, the next day is a move higher. And sure enough, on Wednesday, August 26, 2015, we closed near the highs of Tuesday. We may now continue to rally, since we are up in Asia as I type, but don't marry your stock positions. The rally will surely be short-lived. When you break long-term trendlines like the stock indices have now done, the ultimate bottom does not occur until we have fallen a lot more than what we have seen so far. In fact, the best trade is to look for a spot where the upward momentum fades and get short. The safest and most financially rewarding plays will now be from the short side. Wish I had better news. Oh, but we can buy other markets like gold and mining stocks. Not so fast!

    Gold And The Miners

    What I find most disturbing is that gold rallied nearly $97 off the recent lows, and has now given back about half of the move. However, the miners, think GDX, GDXJ or IAG, have given back nearly all of their recent strength. I expected a correction in both markets but not to the extent to what we have seen. These same miners are supposed to be leading gold out of the hole. Instead they are leading us down a rat hole. Now take a look at the daily chart of December Gold:

    On the way up, there was a gap left between $1132 and $1128 that I thought would provide some support on a correction. Usually a market goes part way into the gap, but does not fill it on the first attempt. Being the 3rd down day in a row, I wanted to buy Wednesday's weakness, anticipating a 2 to 3 day rally starting on Thursday. Now I am not so sure. I was a bit surprised we filled the gap, but then kept falling lower and lower, finally hitting a low of $1117.20. We did stay above the recent consolidation low on the way up, of $1108.50, but we should have held the $1128 area. This is quite concerning. For now, we can still maintain a bullish posture with the hopes that today's action was overdone. However, we cannot tolerate any close under $1117.20.

    What adds to my concern is the fact that silver got obliterated today, making a new multiyear low. I am not going to post that chart but trust me, it is ugly. The only consolation is that when silver falls this hard into new lows, it will tend to consolidate. Palladium has fallen for 4 days and is not far from the 2008 lows. Today Palladium also made a multiyear low. Platinum recently was trading over $170 below the price of gold, (rarely does it stretch to a $200 discount). So with gold's drop of nearly $14, Platinum actually closed up over $7 today on profit-taking.

    Today I knew to buy into the weakness all the way from $1130 to wherever we bottomed which turned out to be $1117, in anticipation of a snapback. Fortunately we got that pop, rallying $10 off the low. This allowed me sell out of my low priced contracts at a profit, and then reload on a dip to $1120.50. On the closing rally I lightened up and now am completely out in the $1127 to $1128 area, hit in the night Globex session. I am happy to report that I ended up with a net profit on the day, going long on a nasty somewhat unexpected plunge lower. However, I am not going to tempt fate and try that again, if we should roll over shortly. Next time I look to be going short.

    Having just rallied $97 out of the hole, leaving the great abyss under $1100, we hit against $1170 and $1200 was not far away. Well, we could not go any further up, and have now given back over half of the $97 gain. But remember, the first dip after such a major rally, can almost always be bought. I have made the most money trading commodities employing the buying of the first dip rule. Thus, I expect to see a rally to at least $1140 and hopefully as high as $1160, $1180 or even $1200. However, if we fail to make a new high above $1170, (and even if we do), expect a major selloff to follow, which can even be to new lows down to $1050 (or lower). Use the strength you see in the next several days to dump out of your gold mining stocks, hopefully at a profit. Those playing IAMGOLD (NYSE:IAG) were encouraged to sell into the recent rally last week towards $2. Since we have now fallen back under $1.50, we are again in a value zone and should be able to buy IAG for a trade. However, you may be advised to use near-term strength to liquidate a good portion if not all of your position.

    Gold Is No Safe Haven!

    Another very disappointing feature is how gold traded on Monday, August 24, 2015. With the Dow Jones falling over 1000 points, you would think that gold would be soaring past $1200. Instead, it made a small marginal new high two ticks shy of $1170, and then closed down for the day. Monday was the day the US Dollar got killed and that alone should have rallied gold up towards $1200. If ever gold was to shine as a safe haven play, Monday was the day. And gold miserably failed. For a long-term gold bull like myself, this is extremely disheartening. It is looking more and more like the bear market in gold will not end until the November/December 2015 timeframe at the earliest. At this point, I would not be surprised to see a marginal new low down to $1050, or another $100 lower than that at worst. For now, I have turned quite cautious and will only scalp very short-term from the long side.

    Bottoming is a process. The first attempt to bottom usually fails. It is looking more and more like gold will not be able to sustain itself above $1100 for long, and will have to retest the lows and likely make at least a marginal new low, before this bear market ends. I wish I had something better to report, but I do not. For those holding IAG under $2 and those who bought miners recently, there is plenty of time to get some rallies to get out, and I am not saying to panic and sell out immediately at a loss. What I am saying is to use rallies to lighten up and be very cautious buying back into the mining sector in any size, until the markets improve. There will be a time to be aggressively long gold and the miners, but now is not yet that time, as I see it now.

    Disclaimer:

    The thoughts and opinions in this article, along with all STOCKTALK 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.

    Tags: GLD, GDX, GDXJ
    Aug 27 2:49 AM | Link | 2 Comments
  • For Now, December Gold Under $1150 Is A Steal!

    (click to enlarge)

    So you were too scared to buy December Gold when it was a steal under $1100, and you missed a rally to $1167.90, a gain of over $95 off the low. No worry, you can buy gold right this minute back under $1150 like I just did. For anyone who missed the freight train that left the station, it has come back to give you a second chance to let you jump on board. This is one of those rare opportunities when you can buy with real confidence!

    Why am I so bullish? Well, overnight December Gold has surged to a high of $1167.90, only to fall down nearly $20 on profit-taking. After moving up so strongly the last couple days, it is expected that gold would hit some resistance levels that would cause some profit-taking. But for those who failed to get in, or were in but playing a small position, this is a great chance to initiate some new long positions.

    If you look at the 4th green bar out of the bottom (August 11th), that was a similar day that had movement wildly in the green and in the red, only to be resolved to a small gain. That was followed by a strong up move the next day. I expect the same kind of positive resolution today and on Monday, August 24th. Gold is enjoying a very powerful short-covering rally, with strength not seen since January 2015. To see what that rally looked like, take a peak at the April 2015 daily chart, to see what we might now expect to see on the current rally:

    (click to enlarge)

    Back in January 2015, April Gold futures rallied from around $1170, to top out in 12 days to just under $1310, a rally of nearly $140. A similar rally from the recent low of $1072, would project a rally up towards $1212.

    During the January rally, after moving over $70 (about half way to the eventual top) there were a couple sideways days of consolidation where gold was unable to hold strength. However, those two days were followed by a powerful bullish thrust move from the high $1240s to above $1300.

    There is so much momentum in the current short-covering rally, it too should not stop without making a powerful explosion upward to force the most calcitrant bear to cover. Your initial target is the $1180 level to then likely be followed by a spike towards $1200 and slightly above $1200. In any case, the current correction back below $1150 is a real gift for anyone who failed to get in early when prices were a real steal!

    Looking back, how unproductive was the bearish media talk when gold futures broke below the critical $1100 level, in what turns out to now be one of the most manipulative market smackdown moves that one may ever see! It got the pundits declaring gold was heading to $1000, $850, $650 and even $350! The media sounded like we could be there almost immediately! Very sad indeed. This nonsense talk kept many a trader from buying gold or the gold mining stocks at rock bottom prices.

    Even though the current bullish move in gold looks to be resolved just shy or just above the $1200 level, it is still only a short-covering rally in a bear market. It is likely that instead of moving straight up to above $1400 (which would turn the gold market into a bull market stance), gold will find resistance soon, maybe $50 to $60 higher, and we might have to retrace back towards the $1100 level. In fact, we might even drop one more time below $1100, and could make a very marginal new low to maybe $1055. However, if we do see that dip back towards the $1100 level or a bit lower, when the media starts their nonsense bearish talk on gold, next time don't listen to it, and buy!

    To follow along as we buy gold futures, as well as GLD, GDX, IAG, KGC or other mining stocks, or trade crude oil (UWTI and DWTI), natural gas (UGAZ and DGAZ) and other commodities, join us in our private Short Bull Trading Room on WeChat. Just download the free app on your phone or tablet, and then add "bobed1". You can then send me a message so I can invite you into the room. Still plenty of room.

    You can also subscribe to my free weekly newsletter. Send an email to shortbull2020@yahoo.com if interested in subscribing. Again, it is free!

    Disclaimer:

    The thoughts and opinions in this article, along with all STOCKTALK 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.

    Tags: GLD, GDX, GDXJ, NUGT, JNUG
    Aug 21 6:28 AM | Link | 3 Comments
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