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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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  • Great Trading Opportunities Await For The Week Of November 17-21, 2014

    There are so many markets that look interesting for the coming week, it will be difficult to pick which market to trade. Should be a very profitable week. I will start with the gold market.

    The Last Two Fridays Have Been Golden!

    Gold could still make a marginal new low below recent support at $1130 in December futures, but the bullish action of the last two Friday's greatly increases the chances that $1100 will now hold on any further pullback. In any case, it is time to for bears to take profits and either wait for a bigger rally to reshort, or better yet, become a bull and start buying the dips. When gold rallied strongly off $1130.40 on November 7, 2014, gold futures did not follow through to the upside, hitting strong resistance at the old support level of $1180, now turned resistance. However, dips into the $1140s were buys this week. Bulls eventually got rewarded with another strong Friday rally that now took us through the $1180 resistance level, to $1192.90. What has been created is a bullish "W" bottoming pattern. We have a higher low and a higher high struck this week. Although I called Friday's bullish action a gamechanger, that could be a bit mature. Michael Noonan is still a bit cautious, click here, and Avi Gilburt is turning bullish, click here, but is still looking for one final selloff going into the end of the year.

    I remain open to the possibility that gold still dips below $1130 support and possibly trades to as low as $1100. However, it is apparent that odds now favor long positions and scalping from the long side is advised for daytraders like myself. If we could make great returns in JNUG this past week, buying in the mid to low $3s, only to sell in the low to mid $4s, buying dips in JNUG during the coming week, should be that much more rewarding. Gold retraced over $30 from the November 7th high. I doubt gold will retrace more than $15 to $20 this coming week. I see the low of December gold at the $1165 to $1170 area at worst. On the upside I am looking for resistance to be tested around $1197 and again at $1206. Now, for the remainder of the year, significant resistance at $1230 to $1250 will probably limit the upside in gold. However, all dips in GDX/NUGT & GDXJ/JNUG should be great for scalping from the long side, especially early next week.

    Crude Oil Is Beginning To Look Interesting For Scalping From The Long Side

    Dennis Gartman came out Friday to say he is no longer short crude oil, click here. On Thursday, November 13, 2014, crude oil broke below the recent support of $75.84 in December futures. I thought the selling was overdone. Although, December Crude Oil fell to as low as $73.25 overnight, it rallied back above $76, closing Friday at $75.82. We will probably roll back over this coming week and retest or break Friday's low, but I will now be buying dips in crude oil, especially when new lows are seen. Producers are receiving prices for spot crude oil $2.50 to $3.50 below the December 2014 futures price. However in North Dakota, discounts are running $8 per barrel, so oil producers are already seeing prices lower than $70 for the crude oil they are selling. Even if OPEC fails to cut back on production, it is apparent that US shale producers who need $80 Crude prices to break even, will have to cut back production shortly. Sub $80 or sub $75 crude oil futures prices cannot be sustained long term. For those who cannot trade futures contracts, one can get long exposure to crude oil through the OIL ETN. Here is the daily chart of OIL:

    (click to enlarge)

    OIL was a buy in the middle of October around $19.50 with rallies of about $1. Recently the $18.60 to $18.85 area was the place to buy, to sell out in the $19.40s. We have now dropped down to support at $18 and dips to $18 and lower should be quite profitable for scalping if one takes profits when OIL bounces 60 to 80 cents off any low.

    Looking forward, I see December Crude oil finding support in the $72.50 area, and again at $71 and $69.50. One can expect to see $3.50 to $4.50 rallies after every low. When December Crude Oil fell recently from the $100 level, it found initial support in the $90 area, that lasted about 2 1/2 weeks. When Dec Crude Oil fell to the $79 to $80 level, it found support there again for 2 1/2 weeks. I would expect that a drop to $69 to $71 would also allow for a similar 2 1/2 weeks of bullish scalping, even if crude oil was to eventually trade even lower. Every time crude oil drops to a large round number, $90, $80, $70, etc., crude oil tends to consolidate. We are now approaching another consolidation level as we dip into the low $70s. With Brent Crude Oil now trading below $80, meeting the Goldman Sachs low target, I would expect for Brent Crude to have some difficulty to continue dropping lower. Likewise, I am very bullish crude oil, should it fall below $70 a barrel, and feel that it should trade $70 to $90 for the next several months. Any dip under $70 should be short-lived.

    Natural Gas Finding Support Around $4

    After bottoming at $3.620 recently, December Natural Gas rallied 92.4 cents to $4.544, on the first signs of cold weather, closing up 9 days in a row. Then Natural Gas fell for four straight days, closing back just under $4.00. Friday's low of $3.931 was 61.3 cents down from the recent high, and a 66% correction. I am looking for a pop in Natural Gas back to $4.30, and eventually back to $4.50 and eventually $5 or higher. Here is a daily chart of the triple leveraged Bullish Natural Gas ETN (NYSEARCA:UGAZ):

    (click to enlarge)

    Friday's low in UGAZ was $12.63, just 40 cents above the $12.23 close of October 31st, still leaving a small gap on the chart. I do not see UGAZ trading under $12 in the near future, and believe that UGAZ is a buy under $14, and a great buy under $13. I anticipate a rally back into the $16 to $18 area in the near future.

    So far in the Sunday night session, December Natural Gas has traded in a range of $4.141 to $4.188, up 12.1 to 16.8 cents. Trading up 3 to 4 percent translates to a 9 to 12% pop in UGAZ.

    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.

    Nov 16 6:36 PM | Link | Comment!
  • Gold Bounced Off The Bottom, But Is Now Rolling Over...Not! GOLD JUST BROKE OUT TO THE UPSIDE!

    The following article was written early today when it appeared that gold was going to close under $1150. However, after being weak overnight, once the regular market opened, it has rallied and rallied big. With last night's low of $1146, the high so far today is $1189.70. If we close today above $1180, we will have a confirmed bottom and breakout to the upside of the recent wedge pattern. We will have closed above last week's high in GLD. This is a game changer. Although I bought gold heavily today in the $1150s and $1160s, adding more in the low $1170s, I sold out between $1177 and $1179 and am flat. I figured we would not take out $1180 resistance. Now that we have, $1180 becomes support and all dips in gold should be a buy until we approach and take out $1200!

    You can see from the above daily chart of December Gold, that on Friday, December 7, 2014, December Gold had bottomed during the night at $1130.40, only to rally strongly during the day, exploding to a high of $1179. This could have been a key reversal but instead, on Monday, December 10, 2014, gold fell back down, forming an inside day down. At that point, nearly every pundit and commentator was saying that gold was now doomed, as it failed to follow through to the upside and continue higher.

    Well, I knew that a more proper interpretation of the price action, was to see that by falling back on Monday, gold would form a wedge pattern where it would go back and forth in an ever tighter range, until it broke out either to the upside or the downside. Thus, after falling back on Monday, I bought that dip, figuring gold would again try and test the upside, which did occur. I bought the triple leveraged Bullish gold mining ETF (NYSEARCA:JNUG) in the $3.75 to $3.25 area, and rode it up to $4.00 and later towards $4.25 & $4.50. However, I was cautious to get out on the rally, knowing that the range would tighten further and we could drop out of the bottom. I posted on Stocktalk that we needed to close above $1170 on Thursday, November 13, 2014 if the breakout of the wedge was going to be to the upside. Thursday's high was no better than $1167.40 and the $1161.50 close was up $2.40, it was not enough. It was apparent that the breakout of the wedge would be to the downside, and the above chart shows the night trading range and premarket trading so far today, Friday, December 14, 2014. The low so far is $1147.30.

    Even though gold apparently is breaking down from the wedge, all is not yet lost however. There have been many similar wedge patterns that can easily be seen on the daily charts in gold, and it is quite common to see a similar hard breakdown of the wedge, as we are seeing so far in today's action. In the past, when similar breakdowns have occurred, it is common to get a bounce back for 1-3 days off the lows, just following the breakdown. Thus, if gold closed down hard today, under $1150, gold should bounce back to the positive on Monday, November 17, 2014. I will be buying gold on today's low, and may buy some cheap JNUG in anticipation of a nice bounce on Monday.

    What happens after that? Stay tuned. One wedge pattern is often followed by another 4 to 5 day wedge pattern, so we could be going back and forth several times in the next few weeks. The good news is that the patterns are quite predictable and offer many trading opportunities for those nimble enough to buy on the dips, and sell out on the rallies. Even if gold eventually breaks down towards $1130, or even $1120 or $1100, if these wedge patterns continue for awhile, anyone buying the dips in JNUG should have excellent trading opportunities going long JNUG on weakness. I will end with a daily chart of JNUG:

    (click to enlarge)

    Below $3, JNUG should become quite bouncy, as the bearishness towards the gold miners, especially the smaller Juniors, is extreme! This market is oversold and subject to violent short-covering rallies. If you bought JNUG say $7 or $10 or higher, and held onto the position during the recent plunge, your trading account suffered greatly. However, at $3 and below, JNUG should offer excellent opportunities to get your money back and more. Just scale in buy small enough that you are actually happy to see lower prices as you are able to buy even cheaper. Then just take profits on the short-covering rallies, which should be frequent at these extremes!

    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 has no positions in any stocks mentioned, but may initiate a long position in JNUG over the next 72 hours.

    Nov 14 8:58 AM | Link | 3 Comments
  • UGAZ: Natural Gas Has Exploded Higher! How Much Higher Can It Go?

    Natural Gas Bottomed Right On Schedule

    Back on October 21, 2014, I published an article, click here, indicating how seasonally it was time to be buying natural gas & UGAZ! In that article, I was looking for a bottom in December Natural Gas at $3.60, which would translate to about $9.75 in the triple leveraged Long Natural Gas ETN (NYSEARCA:UGAZ). If you look at the above daily chart of December Natural Gas, you will see that on 10/28/14, the fall 2014 low was scored in December Natural Gas at 3.620, within a couple cents of my low projection. Since that time, natural gas has closed higher for 9 consecutive trading days, hitting a high of $4.494 on Friday, 11/07/14. I have remained long natural gas futures contracts using the larger contracts as well as the 1/4 size mini contracts. I have also caught much of the rally while being long UGAZ.

    At the close of trading on Friday, there was some late profit-taking and I again bought into the weakness. Within the last hour natural gas opened for trading for the week at 4.509 and shot up to 4.544. I took profits at 4.520 and am now flat. There is a great likelihood that during the day session on Monday, we will fall back to partially or fully fill the gap down to where the market closed on Friday at 4.412. It is truly amazing that natural gas could pop 90 cents off the bottom in just 10 trading days (two weeks). I expect to see additional strength over the next couple weeks and plan to continue to buy dips and scalp from the long side. Sometime in late November or early December 2014, we should hit enough resistance, likely close to 5.000 where the bulls will take profits and we might correct back down 50% of what we gained on the first cold weather surge. If natural gas moves from 3.620 to 5.000, a gain of $1.38 per mmBtus, we may only fall back to the $4.300 area, which is not that much lower than we are at this time. You will read a lot of bearish articles telling you how the current rally is overdone. Long-term these prices may not be sustainable. However, with winter not even starting yet, the only safe way to scalp is from the long side IMHO. We can now take a look at the UGAZ chart:

    Looking For Another Cold Winter To Rally UGAZ

    If you believe the theory about Siberian snow accummulation fortelling a cold winter, click here. Then you should be using dips in UGAZ to scalp from the long side. Here is a daily chart of UGAZ:

    (click to enlarge)

    UGAZ has rallied from $10.02 to $18.75 so far. On a short-term basis we are overbought and could correct back towards to the $14 area, but I am still looking for a move towards $5.00 in Nat Gas which would translate to a move to $23 in UGAZ. The secret is to scalp lightly from the long side and keep back powder to add more on further weakness. One does not want to hold leveraged ETFs longer than 2-3 days when holding losses. If one is holding a gain, one can hold up to a week or two. The purpose of these ETFs is for daytrading and that intraday scalping should be the goal. The high volatility of natural gas allows for 20 to 30 cent moves in UGAZ multiple times a day.

    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.

    Nov 09 10:18 PM | Link | 4 Comments
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