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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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  • Using Break Of $1240 Support In Gold To Get Long Both Gold And Miners

    (click to enlarge)

    Gold has broken support under the June $1240 support area, and many are predicting further doom and gloom for the metal and miners. However, although it may take another week or two to form a bottom, I do anticipate major support at $1200 will hold, and if not, $1180 should be rock solid support for both now and the remainder of the year. One reason that I am optimistic on the bottom holding in gold, is the fact that when we bottomed in December 2013 in the miners, we had experienced one of the longest bear markets on record. If we would break the support in the gold metal from December 2013, that would surely make another new low in the miners and further extend the bear markets in both, by and additional 9 or 10 months. I wrote several instablog articles where I discussed the length of previous bear markets in gold mining stocks, and I believe that chances are very low that the bear market in the miners is extended beyond what we have already seen and if it is, it will only score a very marginal new low.

    Although I do not believe the miners will make new lows in their various indexes, they could continue to drop over the next week or two, as predicted by traders and dealers in Kitco's weekly survey, click here. Although they could be correct for the early part of next week, I am not convinced that by the end of next week, gold will close down. The bears number 18 and the bulls number only 5, the kind of lopsided numbers you would expect at a bottom.

    Also, consider this. The current move down is quite extended with 9 consecutive days making lower lows. It is indeed rare to get this many days in a row in any market, where the previous day's low is taken out to the downside. Bulls have been decimated. There is definitely blood in the streets, and below $1240 in December Gold futures, I am actually quite bullish. I have calculated that the lowest print should most likely be somewhere around $1206, with a 70% probability that $1200 holds as support, and over an 85% chance that $1190 holds on the current down move. Once we bottom, hopefully in the low $1200s, one would expect to see a $50 pop back out of the bottom, with the possibility the move could extend to $100 or even $200. Between now in the $1235 area, down to $1205, I will be accumulating gold contracts to play for a move back towards $1255 and possibly much higher.

    In the meantime, the triple leveraged bullish Junior Mining Stock ETF (NYSEARCA:JNUG) has performed admirably. I have been recommending buying JNUG on dips under $17 and that has worked out well, click here. Recently, there have been some upgrades on several of the mining stocks which has helped the miners slightly outperform the metal. This may help JNUG bottom at a price much closer to the current low so far of $16, rather than down around $15 or $14. However, when the bottom is in, and it should be within the next couple weeks, if not today or early next week, expect a quick $5 pop in JNUG, with the potential to pop $10 to $14 off the low a couple months later. I will end with a daily chart of JNUG as follows:

    (click to enlarge)

    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.

    Tags: JNUG, GLD, GDXJ, GDX
    Sep 12 2:38 PM | Link | 6 Comments
  • Buying The Triple Leveraged Junior Mining ETF JNUG On Dips, Continues To Pay Off Big

    Background

    (click to enlarge)

    If you have not read my two most recent game plan articles in trading the triple leveraged bullish Junior Mining ETF (NYSEARCA:JNUG) you can find them here and here. When the first article was written on the evening of August 25th, JNUG had closed under $22 for the first time in over 9 weeks. That buy was very timely, as JNUG would immediately turn higher for 4 trading days, hitting a top at $25. The 2nd article was written the evening of Sept. 24th, when JNUG traded to a low of $17.70 and closed down hard. The next day, JNUG would pop back to score a high of $20.20 and closed $19.81. However, it was an inside day, closing up, which is a bearish pattern, and the higher close occurred on a Friday which also made me suspicious of the strength.

    It was not surprising then that on Monday, September 8th, gold would open the week lower as has been typical lately, and JNUG was pulled to a new low of $16.60 and closed below $17, at $16.88. If buying in the $17s brought us back to $20.20 last Friday, buying under $17 should be even more rewarding for scalpers, I thought. So today, for those who are following my progress on Stocktalk, you know how I reported in real time, how I bought JNUG at $16.82 and again at $16.20. The low of the day was $16.11, but a late day oversold gold short-covering rally brought JNUG back to a high of $18.74 and $18.34 close, making many in our group quite happy. Because JNUG made a new low, running stops and then reversing higher, this was a real reversal pattern and I decided to not take profits this time and am holding overnight in hopes of selling at $20 if gold would happen to rally more over night. But even if gold is not strong in the morning and JNUG opens down a bit, one should get a rally to at least $19.50 and I will look to unload there if $20 is not reached early on Wednesday.

    Plan Going Forward

    I have calculated that there is better than a 2 out of 3 chance that JNUG trades above $20 in the next 1-2 days. But, depending what gold does, JNUG could easily slip back towards $16, and is vulnerable to make lower lows for the foreseeable future, down to 15, to $13 and possibly even lower. In fact, before JNUG turns up for good, I have calculated that JNUG could fall to a low of $7, based on the gold metal falling possibly to the $1180 to $1200 support level over the next few months. However, neither gold nor the miners will move straight down, and I will venture to say that all dips below $17 should continue to be excellent buys, as JNUG dips like a coiled spring, only to snap back. I plan to continue to buy these dips while taking profits on the snap back rallies. At some point, the bottom will be in and the Junior Gold Mining ETF (NYSEARCA:GDXJ) will bottom and a rally of 35% to 50% will follow, causing JNUG to rally 100% to 150% off the bottom.

    The reason that I like buying JNUG under $17, is that even a dip to $7, should cause JNUG to spring quickly back to a price above $17 where one should be able to get out at a profit. The lower price that one buys JNUG, the greater chances one has to make money on the trade, and the percentage gains will do nothing but increase the lower price JNUG falls to.

    If you have followed my blog postings over the past year and a half, you know that I normally prefer the leveraged big miner NUGT over the Junior Mining JNUG. However, at extreme lows like we are currently experiencing, thanks to the extreme negative sentiment towards gold and the miners, buying JNUG is extremely compelling and more compelling than owning NUGT. Think of it as a Texas Hold'em poker game. Sometimes the pot is so large, it pays to gamble on a weak hand, and to stick around and even call, with hands that normally, one would throw away. When you win, the win is so big, it makes up for your losses and you end up a net winner. In a similar fashion, the odds are in favor of buyers of JNUG right now, IMHO.

    Right now, buying JNUG on every new low, becomes a safer and safer bet, with bigger and bigger payoffs, the lower JNUG drops to. With every new low in JNUG, the same amount invested will provide greater and greater payoffs.

    But remember, the secret is to use any and all rallies to lighten up and to scalp only, and not hold onto a trade for longer than 3 days at a time. Owning JNUG above $17 is not nearly as attractive, and for now, one wants to sell out on all rallies to $20 and higher as JNUG tries over and over to bottom and fails.

    December Gold Is In The Sweet Spot Below $1255

    Back in early June, December Gold bottomed at $1241.70 and rallied five weeks later to a high of $1347.50. Then December Gold futures was a buy at $1295 (bottom of $1294.40) for a $32 pop, a buy a 2nd time at $1290 (bottom at $1289.40) with a pop of $25, and a 3rd bottom at $1285 and below (bottom at $1281), with pop of over $43 to $1324.30. After consolidating for a week, we have begun another 3 dip pattern. The first dip was a buy at $1275 (bottom at $1273.40) with pop of $24, 2nd dip a buy at $1265 (bottom at $1263.10) with pop of $16, and 3rd dip a buy at $1255 (bottom so far of $1248.10) and late day rally of about $10 off the bottom so far. During this last group of 3 dips in gold, the market is slipping further down and rallies are weaker. Since we are so close to major support at $1241, I expect to see December Gold stop around $1245, with a rally to follow of up to $40 or more to match the previous 3rd pop of $43 that occurred in early August.

    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.

    Tags: JNUG
    Sep 09 7:35 PM | Link | Comment!
  • Update On The Game Plan For Trading The Junior Miners Leveraged ETF (JNUG)

    If you did not read my previous article where I describe the game plan for trading JNUG, please read it here. Even if you did read it already, you probably want to check it out again to familiarize yourself with what I had described back on August 25th. At that time, I was bracing myself for a further drop in JNUG, but fortunately support just under $22.00 held, and JNUG would rally to a shade under $25. We can see this on the updated JNUG weekly Japanese Candlestick chart as follows:

    (click to enlarge)

    This is only Thursday so the last bar is not complete until Friday's action is factored in. For the week so far, JNUG has lost over 25% of its value with a 14 1/2% fall just occurring today. As bad as the chart looks, one can see that we are not that far away from some pretty good support around $17 where JNUG stopped falling last April and at that time, JNUG was able to spring back to end above $21 the following week. Then in late May, JNUG hit a major low at $13.32 and 6 weeks later, would rally all the way to above $36.00. The March to May selloff from $43.14 to the $13.32 low, took just 11 weeks. We are presently completing the 8th week moving lower from the most recent peak at $36. No one knows exactly where JNUG will bottom, but somewhere between $13.32 and $17, JNUG should find a bottom within the next 3 weeks, and one can expect to see a major short-covering rally to follow. Once JNUG bottoms, I would not be surprised to see it move back towards $30, as was predicted in my previous article. At present I have a very small position in JNUG that I picked up in the low $20s and I did not add to my position today. I am waiting for a bottom formation to purchase more shares to average down to a price in the high teens, so that if JNUG pops back towards $20 or $21, then I can liquidate the position at a nice profit.

    Summary:

    What is important during these volatile times, is to remember that the miners have not always had such negative sentiment. In fact, a couple months ago, they could do no wrong, and JNUG was able to make that high at $36.00. It is amazing how quickly the sentiment has turned negative on both gold and the miners. It was comforting for me to read the following article by David at Imperial Beach, click here. I really like what he said at the end of the article, that GDX has a P/E ratio of 31, while GDXJ has a P/E of only 13. The Junior Miner Index (NYSEARCA:GDXJ) had been obliterated compared to the big miners. At some point, it limits how much they can fall, and makes the percentage gain on rallies, all that much greater. Within the next 3 weeks I am looking for a bottom in GDXJ and therefore JNUG, to be followed by a rally lasting several weeks that brings us back to $30. Even if I am wrong about the big rally to follow, I am very confident that JNUG should bounce $5 off the bottom, where ever that is. I just need to hold off adding until we are at very low levels, so my average price is quite low and easily exceeded on a short-covering rally. Fortunately I have purchased less than 10% of the shares that I anticipate I will be adding in the near future on further weakness. The lower it goes, the more money I hope to make on the rebound.

    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.

    Sep 04 7:50 PM | Link | 1 Comment
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