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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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  • Crude Oil Is At Critical Support And Should Bounce Shortly, But ERX Has Already Bottomed!

    Crude Oil Is Sitting At Long-term Support

    The above daily chart of September Crude Oil shows a market that has been in a horrific downtrend. It all started with that breakdown on Friday July 3rd when the crude oil market traded on the Globex and broke down, even though the market was technically closed. When traders returned on Monday, crude oil just got slaughtered. This was a telling sign that something had changed and I should have been more proactive in proclaiming the threat to bulls who were playing the triple leveraged ETN (NYSEARCA:UWTI). I was still hopeful that the $49.50 area would show some support. When that support broke I have not been hopeful for a turnaround.......until now. The crude oil market is finally trading near the $42.03 area struck in late March 2015. That was good for a 7 1/2 week rally to $62.58. Well, we are back now just under $42 and the downward momentum appears to be fading.

    One constructive sign was the fact that on Friday, August 14, 2015, we bottomed at $41.35, and closed at $42.50, creating a bullish hammer on the daily charts. Then today, August 17, 2015, we traded within Friday's range. This inside day, closing down, should have an up close the next day (Tuesday) about 70% of the time. This is another bullish factor. If the bottom at $41.35 can hold, we could easily bounce back to resistance at $45, $47, or even $50, rather easily, considering how oversold the market is.

    One other bullish factor is the fact that the last 7 trading days of action we closed down, up, down, up, down, up and now down today. We are due for a turnaround Tuesday up close, and if we could get above $43, we could see 2 or 3, or how about 5 up days in a row? There is enough buying occurring at these lows to turn the market up after every new down day, recently. The downward momentum is showing signs of fading!

    Which ETF or ETN To Play?

    The ETN that I hate the most is the triple leveraged ETN as it is now down to $1 per share and threatening to go below $1. If the bid and ask is one cent apart and UWTI is trading at $1, there is a 1% spread between the simple bid and ask. That makes trading extremely expensive and thus, until there is a reverse split, I see no reason to touch UWTI. Here is a daily chart anyway:

    (click to enlarge)

    It is amazing that we have not been able to touch the blue ten day moving average line for 12 days. Before those 3 days in late July where UWTI touched the blue line, it was the first time then in about 25 trading days (5 weeks). This shows the crude oil market has been in an bearish imbedded stochastic moving lower. You can see how hard it is to break these. When we do finally turn, don't be surprised if the rally lasts a few weeks or months.

    A better vehicle to use to catch this bottom in crude oil should be the double leveraged ETF (NYSEARCA:UCO). Here is the daily chart of UCO:

    (click to enlarge)

    At least UCO is trading at a nice healthy price, just under $22. Also only being double leveraged, the slippage is less than half as severe as you experience with a "triple" like UWTI. Looking at the flat-lining of the MACD, it would not take much of a rally to get a solid MACD buy signal.

    However, another choice you might consider is the triple leveraged energy stock ETF (NYSEARCA:ERX). It has already bottomed and started rallying. If crude oil turns up, it should also do quite well. Here is a daily chart of ERX as follows:

    (click to enlarge)

    The ERX bottomed on August 6, 2015 at $33.91, and scored a bullish engulfing pattern that very day. After a retest lower the following trading day, ERX surged for 3 days to a high of $40.95. It has now fallen back in a consolidation pattern but managed to still close up slightly today, despite crude oil again closing down. I like buying ERX below $39, and anticipate a move back to $50 or higher. The MACD has given a buy signal over a week ago, and the blue ten day moving average line on this chart, is acting as a support line now. If I was going to trade one of these ETFs or ETNs, I would choose ERX as having the most upside potential with the least amount of downside risk.

    To follow along as we buy ERX, as well as GLD, GDX, IAG, KGC or other mining stocks or Gold futures, 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, UCO
    Aug 17 10:07 PM | Link | 2 Comments
  • The Bottom Is Near For Gold Mining Stocks In GDX & GDXJ, As Well As IAMGOLD (IAG)

    GDX Is Rock Bottom Cheap!

    The gold mining ETF (NYSEARCA:GDX) closed down for the 7th consecutive week, and has closed down 11 of the last 12 weeks. In the process the value of GDX has fallen to an all-time low. Here is a weekly chart of GDX:

    (click to enlarge)

    From a high of $21.25 in early May, in 3 months the price of GDX has hit a low of $13.01, a drop of 38.8%. You can compare the current carnage to what was experienced during a similar 3 month drop in GDX from early August to early November 2014. That involved a drop from a high of $27.45 to a low of $16.24, a fall of 40.8%. Both in time and in degree, we have fulfilled as much pain as is necessary and a turn can occur at any moment.

    The gold mining stocks usually lead the metal both on the way up and on the way down. Thus, the miners could and should now start moving up from the lows and they should pull the gold metal up with them. At some point soon, the miners should begin rallying even if gold should make a marginal new low. So if you want to buy the miners at the lowest bargain prices, you will need to start buying before you see a turn in the metal.

    For comparison, we should also look at the weekly chart of GDX back in 2008, the other recent time in history where the GDX fell precipitously, making a major price low. Here is that chart:

    (click to enlarge)

    From the middle of July to just past the middle of August 2008, in a move taking 3 1/2 months, GDX fell from a high of $49.90, to a low of $15.24. That was a drop of 70.7%. The percentage drop was so great because the gold stocks were in a long bull market and trading at lofty levels. Contrast that with the current situation where GDX has been suffering through a protracted 4 year bear market and has already completed much of the correction prior to the recent capitulation selling move. The 2008 was more sudden and was much more volatile. GDX fell for 5 weeks, rallied 2 weeks, fell 2 weeks, rallied 2 weeks, and then bottomed 4 weeks later. This back and forth movement made buying the dips much more lucrative and the bounce off the lows occurred just as dramatically as the selloff. Today GDX has fallen in a slow grind lower and will therefore recover in a more slowly grinding higher fashion.

    If we are not already at the lows, we are probably within a couple weeks from the bottom for the gold mining stocks. This is the time to accumulate shares in GDX and GDXJ. Also, for those wanting to play the triple leveraged NUGT and JNUG, the "triples" are cheap enough that starting to scalp or scale trade in them now should not be a problem. Even if you don't catch the exact bottom, it is hard to imagine a scenario how you would blow out your account if one started at the current levels. Even if we are heading lower, we should start to see bounces off the bottom that allow for taking of partial profits and freeing up cash to buy more at even lower levels.

    IAMGOLD (NYSE:IAG) Has Probably Already Bottomed

    (click to enlarge)

    Unlike most other miners, IAG has rallied for the last 2 weeks. Friday's close of $1.56 is 4 cents higher than the previous Friday. I wrote an article August 1st, found here, where I called for a bottom. That bottom has now been confirmed since we fell this week and retested the bottom and have rallied to a new recent high mark and close. This is a typical "w" bottoming pattern. If you are not long this stock, you may want to consider buying any and all dips. IAG announced earnings on August 5th, and showed that they still held a similar large cash position that they did the previous quarter, and their cash hoard exceeds the amount they owe in debt. This company should be a survivor.

    A Rally In The Washed Out Canadian Dollar Would Pull IAG Higher

    One thing that could help IAG is the fact that it is closely correlated with the Canadian Dollar movement, being a Canadian company. Here is the current Canadian Dollar Chart:

    This monthly continuation chart goes back to the middle of 2006 through the end of July 2015. This past week the Canadian Dollar fell an additional 22 ticks. You can see above that the Canadian Dollar has just now broken below the low scored in early 2009. However, it has taken 3 weeks for the Canadian Dollar to fall from the .7700 level to the .7600 area. It should not be easy to continue to push the Canadian Dollar lower, although it could fall to the .7400 level and eventually the .7000 level.

    Any rally in the Canadian Dollar should help lend support to IAG. One thing that could really help is a seasonal bullish cycle in the Canadian Dollar that is due to begin on Monday, August 10, 2015, as described by Moore Research, found here. The Canadian Dollar likes to rally for 40 calendar days beginning August 8th and ending September 17th. The trade has worked 13 of the last 15 years. This trade is one of two free trades Moore Research gives out each month at their website www.mrci.com. With the seasonal kicking in the Canadian Dollar and a similar bullish seasonal beginning in gold, it could be a very good time to be buying the miners, especially since they are trading at record low levels.

    To follow along as we buy IAG as well as GLD, GDX, KGC or other mining stocks or Gold futures, 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: GDX, IAG, GDXJ
    Aug 08 3:38 PM | Link | 3 Comments
  • An Ever Stronger Dollar? We Have Nothing To Fear But Fear Itself

    Crude oil, gold, you name it, nearly all commodities are presently in a severe bear market, and are trading near multi-year lows. The weakness has been made much worse by an ever appreciating US Dollar. The US Dollar rally is already 13 months old and is slated by pundits to rally for many years to come, if not infinity. There is a hysterical belief that the US Dollar can only go one way, and that is higher against virtually every other currency in the world.

    As a contrarian, not only am I not convinced that the US Dollar strength is infallible, but I am looking for a downturn of 10 to 20% in the value of the US Dollar to begin almost immediately. You must now think that I am totally nuts! With the impending rate hike cycle to begin in September 2015, with an additional rate hike expected in December 2015, the US Dollar can only go higher. Well, I wish they would get busy and raise rates early and often. Delaying the raising of rates has only allowed the markets extra time to raise the value of the US Dollar to dizzying heights. The rate increase for 2015 and many years in the future, have already been priced in....not once, but several times over. I say this emphatically as a truth. The US Dollar is DOA, "Dead On Arrival".

    I am looking for the US Dollar to top out as early as this coming Monday, August 10, 2015. History is on my side. Not only is a 6 week bullish seasonal for the Canadian Dollar to begin that same day, but both gold and crude oil are overdue for a seasonal upturn.

    Just click here to read this article from Sam Ro of the Business Insider. He explains that after the first rate hike, in the last five tightening cycles, the US Dollar weakened by around 10% over the following 3 months. The current rally is so overdone, and sentiment is so ridiculously one-sided, unlike the 10% historical corrections of the past, I would not be surprised to see a drop of 20% or more by the end of the year. Just thought it was time that a different view was posted, just for the record. Not everyone is a lemming who blindly follows the crowd and "group think".

    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.

    Aug 06 11:35 PM | Link | Comment!
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