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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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  • 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
  • After Groupon Inc.'S Post Earnings Smackdown, GRPN Could Rally Halfway Back Up The Next Few Days

    Groupon (NASDAQ:GRPN) Should Be A Short Term Buy Under $6

    (click to enlarge)

    On August 4, 2014, I wrote an article recommending taking profits in Groupon Inc. (GRPN) prior to the Tuesday August 5th earnings release. click here. That turned out to be excellent advice. When earnings came out, GRPN sold off immediately from the $7.07 close, to under $6.00, to rally back to $6.30 and then to return to prices under $6.00. The following morning, GRPN would open on its lows ($5.68) and work its way higher during the day. I recommended on Stock Talk to buy the stock when I purchased shares at $5.78. Remembering that post earnings rally to $6.30, I took advantage of the rally to $6.28 on Wednesday and sold my shares at $6.24, again announcing the sale on Stock Talk. Today, August 7, 2014, I recommended buying the stock under $6.00 and GPRN closed down for the second day post earnings, two cents off the low of the day at $5.95.

    When you look at the above daily chart of GRPN, you will see how the stock gapped down in February and in May. Both times were following earnings. In February the stock fell for 2 days but in May the low was made on the first day after earnings and the stock then rallied. This time the low was made on the first day following earnings ($5.68) and after two days we have settled on the second day about in the middle of the post earnings range.

    I recommended buying GRPN today because I am looking for a similar move that we experienced in May. Back then GRPN rallied on the 3rd thru 5th days post earnings, and better than half of the gap was filled. Over the next few days, I expect to see a rally attempt back towards $6.30 and then likely $6.50. I am not bullish above $6.50 because the stock should within the next 3-4 days hit a high that will become difficult to breach. Anyone who is buying now or that held on through the earnings report, should consider selling on strength on Tuesday or Wednesday, August 12th or 13th. I believe it is worthwhile picking up shares below $6.00 now, to sell in the $6.30 to $6.50 range for a swing trade that should last less than a week. After a week post earnings, I look for GRPN to work sideways to lower and retest the lows and possibly even break down closer to $5.00. However, 1-2 months post earnings, GRPN is expected to bottom in the low to mid $5.00s and then work higher to fill the gap at $7.07 prior to the next quarterly earnings report.

    Why Trade GRPN?

    GRPN is a stock many traders would not pull out of the junk heap to trade. However, there are several factors that make this stock tradable. First, GRPN is closely aligned with the hot internet and social media space. Second, the company is not losing money, although the profits are miniscule. Third, the company has no debt, so the stock should not be going out of business anytime soon.

    With those three positives I may still not trade GRPN except for the fact the stock was killed post earnings back in November 2012, hitting an all-time low of $2.60, and then climbed all the way back to $12.76 by September 2013, just 10 months later. I did not play that move from the $2s to the $12s, but I do want to continue to follow the stock after I liquidate my shares (hopefully in 2-3 days).

    For anyone who wants to play this stock longer-term, one can scale into the stock using 10% of their tranche in the $5.50 to $6.00 range, 20% in the $5.50 to $6.00 range, 30% in the $4.50 to $5.00 range and 40% in the $4.00 to $4.50 range. Putting more cash in at the lowest prices greatly reduces your average price and greatly enhances your profit potential. Before we close, just take a look at the weekly chart of GRPN

    (click to enlarge)

    The above weekly chart of GRPN shows how the stock went sideways for about 3 months when it came public in late October 2011. Post earnings in February 2012, the stock began a 9 month selloff into the abyss, hitting bottom after just over one year of trading. Then the stock rallied for 10 months to score a high of $12.76, and then double topped at $12.42 just 3 1/2 months later. From that high in early January 2014, I am looking for a 9 month selloff, similar to the 9 month selloff from February to November 2012. Marking 9 months from early January 2014, I would expect for GRPN to bottom again somewhere around the 10th of October 2014. Although I should be liquidating my current swing trade shares in the next few days, I will be monitoring this stock for other future trading opportunities, especially beginning October 2014.

    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 GRPN.

    Tags: GRPN
    Aug 07 7:56 PM | Link | Comment!
  • China (FXI) Has Been Hot Lately, But Is It Time To Short China Using Leveraged ETFs, FXP Or YANG?

    The Chinese 25 Stock Dow Jones type ETF (NYSEARCA:FXI)

    Today I found a couple very interesting articles related to the Chinese Stock Market. First I found an article explaining how China is a safe haven due to the recent world turmoil, click here. Instead of buying gold as a safe haven, or even the U.S. Dollar, turns out buying Chinese stocks was the play to make!

    Then I saw an article from Invester's Business Daily, click here, where they explain how various stocks like BitAuto (NYSE:BITA) are overextended and maybe it was time to take profits. (Note: I was invested in BITA during the recent correction and should have stuck with it). That article explains how the iShares China Large Cap ETF (FXI) rallied 9.3% in July and 15.9% since April 30th. However, the article warns how this fund tends to be volatile and there are accounting scandals, etc. Well, we can take a look at the FXI weekly chart going back 3 years, as follows:

    (click to enlarge)

    The last candle only includes one day (Monday of this week), rather than an entire week like all the other candles on this Japanese Candlestick chart. You can quickly see how 38, 39 and 40 have been major points of resistance in the last 3 years, and we closed today at 41.07. We are looking very extended for sure.

    I thought to myself that maybe instead of taking profits in BITA or in FXI, maybe it was time to short the Chinese market. I did a search on Bloomberg, and my pal Tom DeMark just happened to publish an article where he is calling for a top in the next few days, in the Chinese stock market, click here. I deeply respect DeMark's opinion and predictions as he has a fabulous track record on his calls.

    Double Leveraged Bearish China ETF (NYSEARCA:FXP)

    Instead of shorting the U.S. stock market, or trying to pick a bottom because we finally had a 4% correction, maybe I will buy shares in the 2X leveraged ProShares UltraShort (Bearish) China ETF (FXP). That chart is as follows:

    (click to enlarge)

    Being leveraged, FXP has slippage, but being 2X instead of 3X, it is not too bad. In the first couple months of 2012, had one bought FXP when it makes a new price low by $10, one would have bought at $100, when the stock market in China began a rally in January 2012. Then when FXP fell to $90, one could have bought more to average down, leaving the average price of $95. By March 2012, FXP rallied to $130, making for a nice profit opportunity. The next time one should buy is on a new low of $10, which would now be at $80 in December 2012. One would add more shares at $70 in late December 2012, giving an average of $75. Then FXP stopped falling on a dip just below $65, so the price of $60 was never hit to buy a third tranche. Well, with an average price of $75, one could have taken profits on a rally to the $92.70 area, and after a correction back to the $72s, FXP hit a high of $106.84 in June 2013. That was another great profit opportunity in FXP. Well, the next time you can buy is on a dip to a new low being $60. In the fall of 2013, FXP kept trading between $62 and just above $70, but finally in mid November 2013, one could buy at $60 when FXP dipped to $56.72. You would not have been able to add at $50, so you would have carried your shares back to a top at $80 in March 2014. Well, recently FXP has fallen to $50 where my system again says to buy and we are presently at $47.83. One cannot buy again unless $40 is seen and that is unlikely.

    Well, when I started and FXP was bought at $100, then I was buying every $10 (10% of starting point of $100). Now that we are below $50, we should buy every $5 so the next buy should not be $45. If we would ever get to $25, then the buy increments would become $2.50.

    My demonstration shows how playing long-term in FXP would not have caused any losses and in fact provided some good gains, over the past 3 years, if one followed the method just outlined of only buying at a new low at a price increment of 10% of the starting point.

    Again, with current price levels half what they were when we started, one should now switch and buy every $5 lower rather than $10, so if one bought at $50, one would buy again at $45 and again at $40 etc.

    Triple Leveraged China ETFs

    One can play the bullish triple leveraged ETF (NYSEARCA:YINN) or the bearish triple leveraged ETF (NYSEARCA:YANG). Since I am now looking for the bearish trade, I would use YANG. Take a look at the weekly chart going back 3 years as we did with FXP:

    (click to enlarge)

    In late 2011, YANG found support just above $70. However, in February 2012, $60 was reached where one would buy and ride YANG back to $100 by the beginning of June 2012. The next key level to buy would be $50 which was hit in late December 2012. In the middle of January 2013, the actual bottom was $44.05, but with the prices below $50, we would have added every $5, and would have been long from $50 and $45 for an average price of $47.50. By April 2013, YANG rallied to $64. Then in May 2013, YANG made a marginal new low at $42.37 where one could have bought and rode back to $63.69 a month later. From that high, one would have waited less than a month to be able to buy at $40. One would have bought at $40, $35, $30, $25, and $20 before YANG bottomed at just under $20 in October and November 2013. The average price for 5 tranche buys with average price of $30 would have been quite scary while trading just under $20. Fortunately there was a rally in February 2014 to $30.06, allowing you out at breakeven (whew!), a dip to $23.50, and then high of $31.42 in March 2014.

    In the last couple weeks, YANG has fallen to under $15. So I would be long at $15, and at these low prices, instead of buying every $5, I can buy in increments 10% of my $15 starting point, which works out to $1.50. So if I bought at $15, then I would buy again at $13.50 and again at $12. So far the low is $13.81 so the 2nd purchase would not have been made.

    This is an illustration to show that long-term buying of triple leveraged ETFs going against the trend do not spell utter disaster. In fact, one can do so profitably. However, one must be patient and wait for new lows, 10% below the last buy point and then one can add on a dip 10% below that last purchase.

    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: FXI, FXP, YINN, YANG
    Aug 05 1:09 AM | Link | Comment!
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