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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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  • Elliott Wave Theory Advises Caution For Stock Trading The Week Of August 18-22, 2014

    I am in nearly all cash and almost exclusively relying on quick scalps in various markets for now, keeping almost no positions overnight. This is what I see for the week of August 18-22, 2014:

    Stock Indexes

    Gregor Horvat of Elliott Wave Financial Service, using Elliott Wave Theory, indicates that the Nasdaq 100 (tech stocks) and other stock indexes, are in the 5th wave of a recent uptrend, click here. Being within a few points from significant resistance, thanks to today's strong rally, he is looking for the stock indexes to roll over shortly.

    Now, if you want to see something really scary, check out this article by Sid from ElliottWavePredictions.com, found here. Sid shows how, on a very long-term basis, the bullish stock market could be on borrowed time. If you have trouble following the commentary, just click onto the charts to see projections of how far the stock market could correct, based on Elliott Wave Theory, taking a longer-term perspective.

    I remain cautious chasing the stock market higher, and prefer to find special situations to play, such as stocks that have been beaten down. Many call it "catching falling knives" but I like to pick up stocks trading at bargain prices when most other stocks look quite expensive. My last article was about SEAS, click here, where I was calling for a bottom formation on Friday. I did not get the exact bottom formation I was hoping for, but the stock did in fact bottom around $18, and now has moved above $19 today. I believe that all dips in SEAS below $19 are a buy, and expect to see the stock bottom shortly and rally towards an initial target of $21. I will briefly cover other markets such as gold and natural gas.

    Gold Market & Miners

    Gold continues to oscillate back and forth in a very tight range. Due to bullish seasonal influences, I prefer scalping from the long side, but one can play both sides successfully, if one is cautious and gets good prices. I continue to like buying dips in triple leveraged bearish miner ETF (NYSEARCA:DUST) under $15, as well as Junior Miners JDST under $10, but feel it is prudent to have some bullish leveraged NUGT or JNUG to balance out the trades, especially if we do get a pop in gold towards $1380, as predicted by Gary Wagner, click here. In the short run, I favor scalping gold from the long side, especially on dips below $1300 in December Gold, and will be scalping NUGT/JNUG as well, at least for the next 2 to 6 weeks. If gold does rally to the $1380s, it may top out there, or gain steam to blow up through $1400. Gary Wagner appears to be more bullish on gold than I am looking at a long-term prospective, but in the short-term, we both see support in gold holding and the potential for higher prices.

    Natural Gas

    Natural Gas has been virtually untradeable if one was trying to play the futures market as the market swings wildly up and down on a daily basis, and sometimes on an intraday basis as well. However, I do believe that one can successfully buy the leveraged Natural Gas ETF (NYSEARCA:UGAZ), if one buys under $14 and spaces into the trade. I feel that the downside is limited for now, and Nat Gas should trade back above $400, towards $450 going into the winter. Presently September Natural Gas is caught in a trading range between $372 to $402, with the current price at $483 as I type today. I don't see Nat Gas going below $350 while Natural Gas searches for a bottom over the next couple months. Mild summer temperatures have reduced demand for natural gas on the spot, and producers have been putting plenty of natural gas in storage to prepare us for next winter. However, thanks to the cold spell we had last winter, excess supplies have been eliminated and we should see nice swings higher in natural gas, when temperatures cool in the fall and winter. If there is any hint that we will have cold temperatures next winter, similar to last year, one could anticipate panic buying with the potential to move substantially higher than we did last winter.

    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: UGAZ, NUGT, JDST, JNUG, DUST, SEAS
    Aug 18 11:52 AM | Link | 1 Comment
  • Why I Believe SeaWorld Entertainment, Inc. (SEAS) Should Bottom Today

    SeaWorld Entertainment Has Taken A 36% Haircut In Two Days

    (click to enlarge)

    Since coming public 16 months ago at $27, SeaWorld Entertainment, Inc. (NYSE:SEAS) has had good support around that $27 level, as shown on the above weekly chart. However, in just two days following a weaker than expected earnings report and guidance, it has lost over 1/3 of its value, from $28.15 down to $18. On Thursday, August 14, 2014, several analysts downgraded the stock, and moved their price targets to the $20 to $21 range, click here. Normal average volume is less than 2 million shares, but volumes the last two days have totaled 41.5 million and 16.3 million. A lot of investors have fled the stock, but somebody is buying the stock at these reduced levels, and I think I know who. Cooperman and other smart money got out of the stock at higher levels, and the private equity firm Blackrock, who took the company public, has reduced their stake to only 22%. I saw one article that said, if smart money is getting out, you don't want to be getting in. However, buying at $18 is a lot different than buying at $28. Smart money could have been selling at $28, but other smart money could now be starting to buy at $18 and lower.

    I consider SEAS a stable profitable company that was sailing along fine but just got caught in a storm of bad publicity, and has been blown off course a bit and landed on a sandbar. The company is already taking steps to repair its reputation, by coming out with an improved living environment plan for the orcas. SEAS is also working to fix its earnings picture problems by cutting costs and repositioning debt. Yes, management is working hard to right the ship and the company should be back on course with the stock price moving higher, shortly.

    Why I Am Looking For A Bottom In SEAS Today

    Take a look at the daily chart to see more closely where we are:

    (click to enlarge)

    There have been two trading days for SEAS investors to digest the latest earnings report and guidance. Today, Friday, August 15, 2014, is the third day of trading post earnings, and is often the day that one can begin nibbling on stocks that have suffered a post earnings smackdown. On Wednesday, SEAS bottomed at 18.17 but was able to bounce in the afternoon to close at $18.90. On Thursday, the stock hit $19.10, but then fell back to retest and break the $18.17 low, running stops in the process. Hitting a low of $17.83, the stock closed at $18.00. You will notice that the Japanese candle formed on Wednesday, had a long lower tail, as the stock closed off its low, but that tail was filled in on Thursday when the stock closed near the lows at $18. Although I would have preferred for the stock to have closed above the $18.17 previous low, the stock was unable to make much more progress to the downside, and is showing some initial signs of bottoming. The high trading volumes should also subside in the next couple days. However, I am looking for SEAS to make a marginal new low today, and to then close off the lows, and likely close up. Today the stock could form a hammer or some other type of reversal pattern, and I plan to be buying aggressively today if a bullish chart pattern develops.

    Briefing looking at the fundamentals, I believe that the selloff was justified to a point, but that the magnitude of the selloff has been extreme and the stock should soon bottom and make an attempt at filling the gap left above $21. At Yahoo.com, I noticed that the current PE has come down from over 60 to 39.05 with the selloff, but the forward PE is now reported at 11.76. Things could and should improve in the future. The only drawback that I see with the stock is that debt/equity is quite high at 279. However, the company remains profitable and should be able to manage their debt and to continue to pay an 84 cents per shares dividend (2.8%). It will probably take several months or quarters to get back to $28 in the stock, but a move from below $18 to $21 could occur within the next few days. They have stretched the rubber band pretty far to the downside and it should snap back up a bit, in the very near future.

    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: The author is long SEAS.

    Tags: SEAS
    Aug 15 8:00 AM | Link | 2 Comments
  • While Global Unrest & Seasonal Factors Helped Gold Rally The First Week Of August 2014, We Could See Lower Prices Next Week

    Gold Should Work Lower This Coming Week

    They say you "Buy the rumor but sell the fact". That might explain why gold rallied Wednesday and Thursday of last week, on rumors of escalating tensions in Ukraine and ISIS terrorism increasing in Iraq. However, when the bombs started flying, (well, at least air strike and humanitarian aid drops by the US in Iraq), December Gold would initially rally to $1324.30, but eventually closed down slightly on Friday. Maybe the market is relieved that the U.S. finally took some action against ISIS and should do more in the near future. Rumors that Russia may be in the early process of withdrawing from the Ukraine border, would help bottom the stock market on Friday and brought gold to the day's lows. Here is a daily chart of December Gold:

    Even if we start out higher on Monday, August 11, 2014, and even if we close up, it would likely be an inside day up (which is bearish), as it will be difficult for Dec. Gold to overcome resistance at $1320 and at $1324. Staying within Friday's trading range (an inside day) and closing up, portends lower prices for Tuesday. We could also start falling from the get go, but either way we should test and eventually break under $1300 early next week, and begin a retest of recent lows.

    For the beginning of the week of August 11, 2014, I favor short term trades on the short side of December Gold as well as the inverse gold miner 3X gold miner ETFs (DUST & JDST). Fundamentals are not supporting higher gold prices right now and I see potential for a $30 to $35 drop in gold next week.

    However, should we get that selloff and again trade towards $1290 or lower in December 2014, I will likely again start scalping from the long-side. During the seasonally strong timeframe of August and into the first week of September, I am looking for gold to be well supported and feel we could hit $1368 or a bit higher in December Gold by the first week of September.

    Once we get to the early to middle part of September 2014, and we rally into the $1365 to $1380 area, December Gold will have to choose between establishing a major bottom by rallying on up through $1400 and beyond, or turning down and falling for the remainder of the year, falling to $1200 or maybe $1150, as Goldman Sachs and others have predicted.

    I saw an article posted today on Seeking Alpha by Tim Iacono, click here, where he was calling for a breakout of the tight trading range to the upside. I agree with this author, but only to a point. I feel that for now, $1325 will hold December Gold in the trading range, long enough to retest and successfully hold support in the $1280 area this week. I then see a break-out to the upside, into the $1368 area or higher in gold. But unlike Mr. Iacono, I believe that breakout could be a false breakout and before overtaking $1400, December Gold rolls over and drifts lower for the remainder of 2014.

    Gold Is No Longer The Weakest Metal

    For some time, gold has been the weakest member of the metals group but this week silver became the worst performing metal with the worst looking chart. Since silver is an industrial metal, maybe the weakness in silver this week is a result of recent weakness in the stock market. Whereas September Silver dropped 43 cents this week (2.1%), October Platinum rallied $17.50 this week (1.2%) very similar to December Gold, up $16.20 (1.2%) this week. Take a look at the daily chart of October Platinum:

    I noticed an amazing thing today about this chart. On July 2nd, October Platinum hit a high of $1523, and then fell for 4 days. Next was a 2-day rally and top again on July 10th of $1523.80. This was followed by a 3 day plunge, and 2-day rally again towards $1510. October Platinum then swung down for 5 days to under $1470, followed by a 2-day rally to above $1490 on July 28th. October Platinum then swung lower for 6 days to just above $1450, followed by another 2-day rally closing $1481.50 on Thursday, August 8th. On Friday Platinum closed lower and should fall for another 4 to 5 days, when I would again look for the usual 2-day rally of course. With October Platinum liking to fall for several days after a 2-day rally, I expect Platinum to pull gold lower this week.

    Instead of rallying like Gold & Platinum, Palladium closed down this week by $4.50, but bounced over $20 off its lows. Profit-taking in the long Palladium/short Gold trades, and long Platinum/short Gold trades, helped support Gold. No matter what gold does for the rest of 2014, I plan to continue to buy Palladium on dips and may eventually start selling gold against it for protection and profits. If gold falls next week, I anticipate being able to buy Palladium in the low $840s or mid $830s. Here is a quick look at the September Palladium daily chart:

    Conclusion:

    I am looking for weakness creeping in immediately on Monday in Platinum, and by late Monday or Tuesday in Gold. I expect to see the weakness continue for the remainder of the week and allow December Gold to trade below $1300, down to $1285 to $1290 or lower. However, I anticipate that December Gold should stay above $1274 support in the short-term and eventually break out to the upside, and trade to $1368 to $1390. I anticipate that rally will fail prior to reaching $1400 and then we work lower for the remainder of 2014. I don't yet know how far gold would fall but don't believe gold stays below $1200 for very long.

    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.

    Aug 10 4:44 PM | Link | 3 Comments
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