Seeking Alpha

Robert Edwards'  Instablog

Robert Edwards
Send Message
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
View Robert Edwards' Instablogs on:
  • Gold Miners Could Bottom Tuesday July 21, 2015 With Retest Friday July 24, 2015

    We are presently experiencing a typical capitulation washout bottom in the gold mining stocks. The gold mining stocks were washed out last fall and I was hopeful we had seen the low then, but I was wrong. The miners have never been this cheap ever in history. GDX is now trading below the $15.83 low hit in October 2008, and below $15.24 if you add in the dividends paid out to date. However, relief is within sight. Please continue reading.

    Tuesday And Friday Should Be Days To Catch A Ridiculously Cheap Price In GDX And The Miners

    (click to enlarge)

    The above chart is a 1-year chart of the large gold miners ETF (NYSEARCA:GDX). You will notice that in October 2014, GDX bottomed around $20 and went sideways for a month. This $20 was a double bottom from where GDX bottomed in December 2013. Notice that when the support was broken, GDX fell for three trading days, consolidated 2 days and then made a marginal new low of $16.34 which was the lowest price seen since October 2008, during the financial crisis low. GDX finally traded to the low $16s late last week, but had a real smackdown red candle last Friday, July 17, 2015. Today, thanks to the flashcrash of Gold, Palladium, Silver and Platinum overnight, that caused gold to break below $1100, additional indiscriminate selling went on in GDX and it closed at $13.78. We have had two hard selloff days which has devastated the bulls. If we follow the typical pattern for the miners we should expect a weak opening in GDX on Tuesday, the 3rd smackdown day, and either a close near the low opening or an intraday rally. Then on Wednesday we should get at least a one day relief rally with Thursday falling back lower but still trading above Tuesday's low. Friday, July 24, 2015 should be the retest of the bottom which could be above Tuesday's low or slightly below.

    IAG Is Dirt Cheap

    (click to enlarge)

    Today IamGold (NYSE:IAG) traded below its November 2014 all-time low of $1.42. IAG closed today at $1.35. When IAG bottomed at $1.42, it rallied back up to $3.39 in 11 weeks. I now anticipate IAG will bottom between $1 and $1.20 and expect a substantial short-covering rally off the lows like we saw last fall. A snapback to $2 should be easily accomplished with a move to $2.50 to $3 possible over time.

    In 2013, in 2008 and in other years where gold and the miners have been slaughtered like at present, large short-covering rallies occur in gold where as much as 75 to 80% of the selloff is recovered in a matter of weeks. I don't know if we will get a $100 or $200 rally in gold when gold finally bottoms, hopefully this week, but based on past experience, such a rally can be expected. We will soon know if we are close to a bottom, or if the flash-crash is going to require a further move down and consolidation before we can bottom.

    In my Saturday newsletter, I mentioned that this week would allow for trading in the triple leveraged NUGT and JNUG as we bottom. However, after seeing the flash-crash, I am advising to not trade those for a bit longer, until a bottom is confirmed. There is always the chance for the negative momentum to get out of hand and for gold and the miners to overshoot the bottom, to valuations that are even beyond absurd.

    To follow along as we buy 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.

    Jul 20 7:13 PM | Link | Comment!
  • Gold Should Bottom The Week Of July 20, 2015, Somewhere Between $1125 And $1084 In August Gold

    What has been clobbering the gold and silver markets lately, has been caused by massive shorting by large speculators and funds. When we bottom, these short positions have to be covered as they cash in their profits by buying the contracts back. Adding to the bottom fishers, buying by short sellers should cause a massive short-covering rally. To understand how this will work and for his timely insight, please check out Adam Hamilton's article, by clicking here.

    Now, before we can start that short-covering rally we must first bottom. Today we made a low price in gold futures, not seen since April 2010, which is over 5 years ago. However, a new bottom is near! And I think I have a good idea when that new bottom will appear. I know most are anxious to see a sharp short-covering rally. I predict the bottom is anywhere from Friday's low in August Gold futures at $1129.60, to as low as $1084.00. And we should hit that low this coming week. Yes, within the next 5 trading days.

    To see how I came up with this prediction, we need to take a look at the weekly chart of August Gold futures as follows:

    Counting from the left, on the third bar of the above weekly continuation chart of Gold we see an important bottom struck the last week of June 2013, at $1183.20. That bottom was powerful enough to cause a short-covering rally in 9 weeks to $1428.00, a gain of $244.80. But in January 2014, we again tested the low, stopping at $1182.00. After a rally to nearly $1400, we would again test that low in October 2014, stopping at $1182.80. These three lows formed what is called a triple bottom formation. Unfortunately the last bottom would fail just three weeks later, when gold broke under $1182, closing that Friday at $1171.10, and falling to $1133.00 the following week. Look at the above chart to see the dark black candle. It was indeed fortunate we bottomed the next week and the $1133.00 level sustained two retests without making a new low.

    To review, breaking $1182 support, caused a $49 further selloff to create the $1133.00 bottom, and a rally back to form a bullish candle the following week the support was broken. However, on Friday, July 17, 2015, on the third test of that low, gold broke down to a new low of $1129.60, closing under the $1133.00 support level on the week. Could we now fall a similar $49 next week like we did when the $1182 support level was broken? Sure. And that would cause a low of $1084 next week, and a big short-covering rally to the high $1120s by Friday to form a bullish hammer candle on the weekly chart. We may not fall as low as $1084, but that is what I feel is the worst case scenario. We could have bottomed on Friday in fact, but that is doubtful since we hardly bounced late Friday. Be advised there are price targets of $1125, $1113, $1100, $1095 and of course my $1084. One of these levels should hold and start a short-covering rally. Last time we rallied from $1133 to just under $1203 in less than 3 weeks, a move of almost $70 off the bottom. I expect no less of a rally when we bottom this time, and possibly more since we have record short interest. I look forward to trading this coming week.

    To follow along as we buy GLD, mining stocks and 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.

    Jul 18 1:52 AM | Link | Comment!
  • Will Gold (GLD) Triple Bottom Around $109.75 Or Does It Have To Fall To $105 First?

    (click to enlarge)

    Avi Gilburt likes to use the GLD ETF as his proxy for gold so I will use it as well for this article. If you have not seen his latest article, I would recommend you read it here. In the article he basically states that as long as various resistance levels hold, GLD is headed down to the 105 region, which would be a price of around $1100 in gold. Avi prudently explains that it is too late to get on the bear side of the trade, as that train left the station long ago. We are very oversold and could get even more oversold, but soon we will hit a price that bottoms gold and GLD, at least temporarily. Better to book a ticket on the bull train, that will surely be heading this way shortly.

    For a historical perspective, take a look at the above weekly chart of GLD. You will see how in the week of July 26, 2010, GLD bottomed for the last time at $113.08, before making the historical move to all-time highs, reached the week of Sept 6, 2011 at $185.85. The move from $113 to nearly $186 is an increase of 64.4% in 13 1/2 months. Once GLD topped out, it would go sideways at elevated levels for 18 months, before finally breaking down soundly below the $150 level. Remember that $113.08 low back in July 2010? You probably don't remember but the market did remember. The market has perfect memory. It was no surprise that we would stop at just above that level at $113.68 in the week of June 24, 2013 at $114.68. After a bounce to above the $137 level, we would double bottom again in the week of December 30, 2013, at $114.46. After a rally back to the $133s, we would briefly triple bottom in GLD the week of September 29, 2014 at $114.42. The triple bottom only caused a 3 week rally back to $120.50, a gain of just 5.3%. It was a triple bottom none the less.

    Then on November 3, 2014, GLD set a new floor, when it bottomed at $109.67. That floor was substantial enough to allow for a January 2015 rally earlier this year to $125.58, a gain of 14.5%. We would sell off until the week of March 16, 2015, when we double bottomed at $109.77. The double bottom was only good for a rally to $117.88, a gain of 7.4%. Well, with today's action, we have now formed what should be a triple bottom in GLD the current week of July 13, 2015, at 109.58. If we do bottom here, we might only get a rally of 5% like we did in the last triple bottom, before falling a bit further. From the $1143 level we sit at while I type, a 5% gain would take August Gold futures back to $1200. That would be a very reasonable target. After that is accomplished, I would expect that we would then make a marginal new low in GLD like we did before, which would be Avi's $105 target. That would translate to about $1095 in August Gold futures, which would be a bottom right after running stops just below $1100.

    Well, whether we stop now and make the triple bottom and get our 5% bounce to $1200, or we continue on our current downward path to the next support level of around $1100, that is the next major support level in gold. I am hopeful that we stop by next Thursday, with a turn at the triple bottom level of $1130 to $1140 in August Gold futures. Running stops, I see us maybe hitting $1125. At that point we should be sufficiently oversold to get a bounce back up to the $1185 to $1200 area, where we will most likely roll back over to bottom around $1100. From the $1100 level, we should begin a bull market to new highs. I don't know if it will work out exactly this way, but you now have a roadmap to follow and you will know if gold follows the path or makes a detour.

    To follow along as we buy GLD, mining stocks and 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.

    Jul 16 9:20 PM | Link | 3 Comments
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.