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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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  • Buying December Gold Futures $1275 & Lower, JNUG $23.50 & Lower, NUGT 43 & Lower

    (click to enlarge)

    Looking at the above chart, one can see that December gold broke the $1274.90 low hit at 1:00 A.M. Chicago time, when we made a low of $1274.00 near 7:30 A.M. CST, and finally just past 12 noon in Chicago, a low of $1273.30 was scored for the day. However, each time gold bounced nicely off these lows. We now need to take a look at the daily chart of December Gold:

    (click to enlarge)

    The above chart includes today's trading, August 21, 2014 but does not have the 1:30 EST close of $1275.20 but instead shows the price of $1278 where gold was trading when I ran the chart. Starting towards the left side of the chart and moving forward, one can quickly see how the price of $1280 has been a significant price support in December Gold futures since it stopped the fall in late March 2014, having dropped from a high of $1390. After falling $110 back in March, December Gold stopped falling once we dropped to the $1280 level. From there, the futures contract quickly bounced back to $1331.50 on April 14th. Five days later, December Gold dipped to a low of $1277.50, but closed back above $1280. Two days later Dec Gold dipped to a low of $1270, but reversed back higher to $1299.20 that very day and closed at $1291.10. The $1280 support level was rock solid as no closes under $1280 could be achieved. After topping out at $1306.40 on April 28th, we would return to hit a low of $1275 just 4 days later but reversed higher that very day to close at $1303.50. Again there was no close below $1280 to be found on the chart.

    Gold would then oscillate back and forth in a tighter and tighter range until May 27th when December Gold finally closed under $1280, settling at $1266.40. The spell was finally broken. Bulls became so discouraged, they allowed December Gold to fall for 4 or 5 more days, until a low of $1241.70 was achieved. From there, December Gold worked higher off the low and finally on June 19th it would explode to $1322.70 and close at $1314.80. This one day of price action was so powerful, that the spell was put back on the Dec Gold market, and $1280 was again rock solid support (until today). On July 10th, December Gold would top out at $1347.50, only to drop to $1294.40 just 3 days later. We then got a $28.80 bounce to $1327.30. This was followed five trading days later, with a low of $1289.40. Another bounce to $1314.60, a pop of $25.20 off the lows followed. The next dip would stop at $1281.30 on July 31st. The next day, we hit a low of $1281.00 and bounced $17.40 off the low to hit a high of $1298.40. With a successful retest of the lows down to $1283.30 on August 5th, Dec Gold would bounce to $1324.30, a gain of $41 off that low in just 3 days. After going sideways for a week, Dec Gold has again fallen to today's low on the 5th down day, hitting $1273.30, and closing at $1275.20.

    Since this is the 5th down day in a row, and Dec Gold likes to bottom after 4 or 5 down days, I would anticipate seeing a rally to begin on Friday, August 22nd, with a bounce of $17 to $25 off the low over the next 1-2 days quite possible. I spoke about this today in my StockTalk comments. You can follow me during the day through StockTalk on SA to see what my latest read is on this and other markets like natural gas.

    I was hoping the spell to remain above $1280 would be strong enough to resist pressure by the bears to run the stops under $1280 and again under $1275 and $1274. However, regardless of the lows, my crystal ball (just kidding), my intuition tells me that we will stay above $1260 on this downturn and might not violate $1271 in December Gold futures. But even if I am wrong, and we continue falling to major support at $1240, I expect to see a near-term rally back to near $1300, even if we were to continue falling to new lows.

    Despite the weakness in gold today, September Palladium futures were strong all day, making back a good portion of what Palladium lost in value yesterday. Palladium is right up there very near recent high levels. If there is profit taking on Friday, in the Long Palladium/Short Gold trades, it might depress Palladium a bit, but offer some support to Gold prices.

    Let me also mention that Jeremy49 correctly pointed out how the bearish triple leveraged large gold mining ETF (NYSEARCA:DUST) was up 6 1/4% today while the bearish triple leveraged Junior Mining ETF (NYSEARCA:JDST) was only up 2%. JDST has been underperforming lately because the Junior Miner ETF (NYSEARCA:GDXJ) has been over achieving on both and down days recently. That is why I have been scalping from the long side in JNUG lately and doing so quite successfully. When the Junior Miners are strong, that is bullish for even the majors as well as the gold metal. I believe it is based on takeover rumors in the Junior Miner sector and just overall positive sentiment right now by many analysts who are starting to recommend hiding out in the value priced Junior Miners since the stock market is at all-time highs. The Junior Miners (GDXJ) are supposed to outperform the majors (NYSEARCA:GDX) on up swings. Typically for every 1% rise in gold, one can expect a 2% rise in GDX and a 2 1/2% to 3% rise in GDXJ. On downswings, the GDXJ usually falls more than the GDX as well. The volatility or beta of GDXJ is higher than GDX. But recently, GDXJ is outperforming GDX even on down days, by not falling as much as GDX. That is not supposed to be happening. The fact that it is, makes me quite bullish on GDXJ & JNUG, but also bullish on GDX & GLD. The GDXJ performance is often the proverbial "canary in the coal mine" (or should I say goldmine?). When GDXJ is outperforming GDX it is bullish, for gold along with all miners. And when GDXJ is underperforming GDX then it is bearish for not only the Juniors, but the Majors, and the metal.

    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.

    Overnight, December Gold fell first to $1285.20, and then just past 2:00 a.m. EST, a 6,000 computer sell order overwhelmed the market and drove prices down to a low of $1274.90. However, upon hitting the low, buyers immediately drove December Gold back to above $1282, and the contract stayed above $1279, for a few hours, as shown in the above 5 minute chart. The last price on the above chart is $1282.70 but a few minutes after capturing this intraday chart image to include in this writing, December Gold hit $1284.10. You might think that this action is extremely bearish, but I would beg to differ. History has shown that instead of being the beginning of a move lower, breaking support below $1280 as has just occurred, is more likely a mere running of stops to force out the weak hand bulls. Although we would retest the lows a couple times later in the day, and make marginal new lows, I was scalping in December Gold futures from the long side, and buying the triple leveraged Junior Mining ETF (NYSEARCA:JNUG). Here is an updated intraday chart of December Gold futures:

    Aug 21 5:28 PM | Link | 1 Comment
  • 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
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