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:
  • Hanging Man Formation Is A Warning To Natural Gas Bulls

    Bearish Hanging Man Formation Needs To Be Confirmed By A Down Close On Wednesday

    In my last article, click here, I was looking for a rally in natural gas which we got on Monday, June 15, 2015. However, on Tuesday, after making a marginal new high, natural gas dropped 9.8 cents off the $2.929 high to a low of $2.831, only to rally back to close up 5 ticks for the day. (Note: I had mentioned in our private WeChat room one should buy on Tuesday on a 10 cent correction but I could not decide if the ten cents should be measured from the high, or from Monday's close). I did not like the action and elected to do nothing, missing a nice buy spot and rally of over 7 cents. But what was formed on Monday, was a more ominous hanging man Japanese Candlestick formation. You can read about that here. Note that to be valid (confirmed), one needs to see a lower close today, Wednesday June 17, 2015. Here is a look of the daily chart of July Natural Gas futures:

    There are a couple previously formed "hanging man" formations in the above chart, the last occurring on May 15, 2015. The next day opened lower, traded both sides of unchanged, and then closed down slightly, confirming the formation. Sure enough, the following day we rallied to a spike high and then started a fast downward correction. Another "hanging man" formation occurred on March 6, 2015 and the following day was a hard drop to confirm. However we fell so hard that day, it turned out to be a temporary bottom and was followed by a couple up days.

    For five trading days July Natural Gas has found resistance just above $2.90. Do not be surprised if on Wednesday, June 17, 2015, that we rally up towards the $2.95 to $3.00 area and then roll over. One definitely needs to be wary.

    Bearish Seasonal In Natural Gas From June 15, 2015 to July 21, 2015

    Today I read the following article from Jay Kaeppel, click here, where he warns of a bearish seasonal trend that has occurred 21 of the last 22 years. The last time Mr. Kaeppel wrote about this, was in 2012 when unfortunately it did not work. As most of you know, 2012 was the year when natural gas prices slipped under $2 and bottomed in April, only to rally strongly for several months afterward and defy the strong bearish tendency to fall for about 5 weeks beginning in the middle of June.

    In 2015 we did not fall to a price under $2, but we did fall to a price under $2.50 ($2.443 in the nearby contract) and have rallied since. This year again could be the exception and we do get a continued rally. However, playing for the exception is rarely ever advised as the odds are extremely favoring the side of being bearish instead of bullish, during the current time frame. This is another reason to be cautious. Even if we don't reverse down hard today, Wednesday June 17, 2015, I am advising taking at least 50% profits on all long positions in futures as well as UGAZ and other bullish natural gas ETNs and ETFs. On any strength, one might want to lighten up even more or find a spot to get out completely and consider buying a small bit of the bearish triple leveraged ETN (NYSEARCA:DGAZ).

    For more up to the minute analysis, 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.

    Last Saturday I sent out my second issue of my free weekly newsletter. Send an email to shortbull2020@yahoo.com if interested in subscribing. 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: UGAZ, DGAZ, UNG, UNL, BOIL, GAZ
    Jun 17 3:03 AM | Link | 1 Comment
  • Gold Should See A Seasonal Low This Week!

    Gold should bottom on a seasonal basis this week. Based on "the count" system that I have developed, using cycle analysis, it looks like Wednesday is the day we could move strongly higher in gold. That just happens to coincide with the end of the 2-day Fed meeting. Maybe something in the statement will cause a bullish reaction in gold.

    If you want to read an excellent (and very long) article regarding the seasonal tendencies for gold to bottom in June, click here. Adam Hamilton makes a compelling argument for buying both the metal and the miners. It could be too soon to buy the leveraged mining ETFS of NUGT and JNUG just yet, but I like buying into GDX and GDXJ, and especially like the recent bullish action in Iamgold (NYSE:IAG). IAG dipped just under $2.00 recently and has since outperformed most miners by rallying nicely when the gold metal is still languishing.

    As I was writing this article, gold just surged higher, hitting $1188.20. Maybe traders are starting to finally start to price in a possible Greek exit from the Euro? Anyway, here is a chart of August gold, up to date so far today:

    (click to enlarge)

    Gold is forming an outside day up and having run the stops overnight below $1174, has now reversed strongly to the upside. Lower prices have been rejected and $1200 is the next target that should be reached later today or on Tuesday. Still looking for that Wednesday surge. If we get above $1200 on Tuesday, the Wednesday surge higher could take us to $1250 or higher. The negative sentiment right now is quite extreme. Even if we don't break above the recent high of $1232, we should retest that level soon!

    On Saturday I sent out my second issue of my free weekly newsletter. Send an email to shortbull2020@yahoo.com if interested in subscribing.

    Also, if you want to 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. See you there.

    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: GLD, GDX, GDXJ
    Jun 15 11:55 AM | Link | 3 Comments
  • Still Like Scalping In UGAZ Over DGAZ, Looking For Bottom In Natural Gas

    The above daily chart of July Natural Gas shows how a week ago, Friday, June 5, 2015, we got a close under $2.60 for the first time in 5 weeks. From that low of $2.581, we saw a rally in 3 days to $2.922. We have since fallen back a couple days on profit-taking. With a rally of 34.1 cents, one can use Fibonacci retracement percentages to look for a spot to get long on some weakness. The 38.2% retracement level comes in at $2.790. The 50% retracement level is 2.750, and the 61.8% retracement level is 2.710. In our private Short Bull Trading WeChat room on Friday, I mentioned that having broken under support at $2.790 overnight, we were vulnerable for a drop to as low as $2.70. But if we should drop that low, one should expect to see a ten cent rally to $2.80 the following day. Before the market opened for the day session Friday, I felt that $2.760 should hold as support as that was where we retraced to on May 7th, during the last big spike out of the bottom. Sure enough, early on Friday the low was $2.765 and we immediately rallied just over 5 cents and spent most of the day hanging around the $2.800 level. But late on Friday, a drop to a low of $2.744 was made, and we closed right on the 50% Fibonacci retracement level of $2.750.

    Should we pop back straight up on Monday, expect to see a quick move back up to $2.844, calculated by adding 10 cents to Friday's low. If we however, need to hit the 61.8% Fibonacci retracement level of $2.710, or we overshoot down to $2.700, I expect for buying to come in and we should move back to at least $2.800 where we spent most of the day on Friday.

    If you look at above daily chart, an April 13, 2015 low was scored at a similar $2.582, that was followed by 3 up days and then 2 down days, just like we got this week. And the next two days that followed were both up days. If we repeat the same pattern, expect a move by next Tuesday back to at least $2.800 if not $2.850. At that point one should liquidate their bullish positions, be they futures contracts or the triple leveraged ETN (NYSEARCA:UGAZ). Here is a daily chart of UGAZ:

    (click to enlarge)

    Many of my followers got long UGAZ beginning in the $2.30s a couple weeks ago and did scale in buys down to the $1.70s, with a greater number of shares purchased at the lower prices. Done properly, one should have had an average price of less than $2 in their UGAZ position. On the 3 day rally, traders were encouraged to take profits in the $2.25 to $2.50 level, and many were quite happy with their outsized gains. Some bought a small position in DGAZ to take advantage of a small correction which we did get. Now buying again from $2.20 down to $2.10 and lower, should natural gas prices fall just a nickel on Monday, the gap should be filled with a retracement to $2.01. Around $2.00 should be a fabulous place to buy and any shares bought lower than $2.00 would be a bargain buy. I expect to see a rally early next week that would allow taking profits again at a price level of $2.25 or higher.

    Although I am a technician, I still do like to read fundamental information to see if fundamentals line up with what I am seeing on the charts. I was reading the Short-Term Energy Outlook report released by the EIA on June 9th, click here. They are looking for a slight rise in natural gas prices through the summer, thanks to air conditioner demand. In that report under the heading "Natural Gas Prices" we find the average Henry Hub price projection for 2015 is down to $2.97/MMBtu and $3.32/MMBtu in 2016. This is much lower than the 2014 average price of $4.37/MMBtu, and the 2013 average price of $3.73/MMBtu.

    Back in 2012, the average price was $2.77/MMBtu thanks to a drop at one point to under $2.00/MMBtu. That was a drastic retreat from the 2011 average price of $4.02/MMBtu. If you should want to see where natural gas have traded on a monthly basis since 1997, click here. You will see that in April 2012, the average price per MMBtu was only 1.95, but by July the price had recovered to $2.95. The low mark in 2015 also came in April at $2.61. May of 2015 had an average price of $2.85. I expect that by July 2015, the average price should continue to rise to at least $3.10. If we are going to average $2.97/MMBtu for the year, we need to spend some time above $3.00/MMBtu, and I suspect it will be sooner than later.

    One article I read mentioned how gas supplies will be drastically reduced beginning in July 2015, supporting significantly higher prices. However, I cannot locate the article right now. If I find it I will post the link in the comments section.

    Today I am sending out my second issue of my free weekly newsletter. Send an email to shortbull2020@yahoo.com if interested in subscribing.

    Also, if you want to 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. See you there.

    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: UGAZ, DGAZ
    Jun 13 3:43 PM | Link | 4 Comments
Full index of posts »
Latest Followers

StockTalks

More »
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.