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:
  • I'm Not Bearish Crude Oil, Yet I Now Prefer Scalping In The Bearish (DWTI) Over The Bullish (UWTI)

    Crude Oil Is Bouncing Up Against Resistance

    The above daily chart of July Crude Oil, shows that on May 6, 2015, July Crude Oil Futures topped out at $63.62 but fell back to close that day at $62.00. For the five weeks since then, no close above $62 has been achieved, although the $62 resistance area has been tested at least four times. As a short-term trader, one can benefit from buying the triple leveraged Bearish Crude Oil ETN (NYSEARCA:DWTI), whenever the $62 resistance area is approached. Since the $62 resistance area has been tested about 4 times without making a new high, it is proving how formidable the resistance is.

    I still remain bullish crude oil and eventually see a move towards $65 and $70 plus. However, at the present time, it is better to scalp from the bearish side when hitting up against resistance levels. To review, back in February, $58 was the point of extreme resistance and there were three quick attempts to break above $58 that failed. Crude Oil traded in a tight $5 trading range from about $53 to $58. But after four 1/2 weeks, eventually July Crude Oil futures broke down to make a double bottom around $48. From that floor, Crude Oil was able to build a base that raised the resistance level from $58, to the current $62.

    Now, should the current $62 resistance level be breached, expect formidable resistance again in the $65 to $66 area. From there, expect a similar $5 trading range from about $59 to $64 or $60 to $65. If we should break out to the upside, one can immediately take their loss and switch over to UWTI. However, if one is more bearish and is well capitalized, one can scale in buy more DWTI as DWTI drops lower and lower as crude oil rallies higher. If crude oil stops at $66 and forms the $5 trading range then when we swing to the low side, one can take off the higher priced DWTI shares at a profit.

    We have traded for about 4 1/2 weeks and are due to make a move to higher ground, or to correct back lower to help build a base. Until we actually do break down (or up), I will continue to play the trading range of buying UWTI when crude oil is trading between $57 to $59, and DWTI when crude oil trades between $60 to $62. Crude Oil typically has a daily trading range of 2 to 3, sometimes 4%. With the triple leveraged ETNs, one can get a daily range of 6 to 9, sometimes 12%. With that kind of movement, it is not that difficult to catch 2 to 3 percent of the moves each day, and not having to hold anything overnight.


    Remember, you don't have to catch all the daily or weekly move, and trying to do so will get you in trouble. Play short term and hold the triple leveraged ETFs and ETNs part of the day if daytrading, which these products were designed for. Holding 2 or 3 days is allowed, but not preferred. Holding more than a week just makes too much slippage that is extremely difficult to overcome.

    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.


    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.

    Jun 12 2:48 AM | Link | 1 Comment
  • Next Move In Gold Should Be A Breakout To The Upside

    (click to enlarge)

    The above Daily chart of August gold shows a close of $1189.30 but that was just where it was trading when I ran the chart. Today at 1:30 p.m. EST the close turned out to be about $1188.70, down $1.10 and gold continues to trade between $1188 and $1191 late this Monday afternoon, June 1, 2015. Being an outside day (higher high and lower low than yesterday), I was hopeful that August Gold would close up to make a bullish confirmation. However, closing up or down a dollar or two is basically unchanged and overall today was a wash with neither the bulls or bears winning.

    In fact, if you look at the above chart, you should notice that for the fifth straight day, August Gold has closed within a tight range of only $3.30. Having fallen from resistance at $1232, gold has found support and even though it is not rallying, neither is it selling off. When tight closes occur after a selloff, it is bullish. The last time we got a similar pattern in gold was March 11th to March 18th, when August gold closed for six trading days, within a tight spread of only $5, ranging from $1154.80 to $1149.80. Look at the long bar that occurred on March 18th on the above chart. Gold rallied up over $25, only to fall back and barely close up. (Note that today we had a surge to $1204.70 which was $14.80 higher only to fall back and close down $1). Back on March 18th, that first day up looked like a failure, very similar to today's action. Then gold continued to move higher and closed up 7 straight days, gaining $66. I don't know if we will now get a similar $66 rally in gold, but we could very well move higher from here. I do expect that the next breakout will be to the upside and not the downside. If we do get that breakout back above $1200, then you should monitor gold closely for a few days. Another failed rally that fails to take out the resistance from $1205 to $1215 would not be constructive and could lead to a further selloff. But what tells me that the next rally should be "for real" is the fact that the $1180 support level has held now for the fifth or sixth time over the last couple months. Gold has a very established base and even if we break the base we should still turn higher, just from a lower level.

    I am aware that the bears keep selling the rallies into resistance but if gold keeps knocking on the topside door, resistance should finally give way and a significant short-covering rally like we saw in January, could be repeated.


    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.

    Jun 01 4:35 PM | Link | Comment!
  • Crude Oil (UWTI) Makes Bullish Hammer Today While Natural Gas (UGAZ) Gets Whacked!

    July Natural Gas Futures Should Bottom Between $2.60 and $2.70

    Last week was really great, picking a top in natural gas and buying DGAZ to capitalize on the selloff. Well, many bought last Tuesday around $4.50. If they waited till this Tuesday morning to cash in, they could have sold at $6.00+ for a gain of 33%. However, if they held on a couple more days until the close on Thursday, May 28, 2015, they could have sold out at $6.77. I wrote in my article that one needed to work out of DGAZ and into UGAZ by the end of this week.

    After a purchase on Tuesday in UGAZ, I sold out on Wednesday's premarket at $2.53. I later bought some UGAZ in the $2.30s and on Thursday morning in the $2.20s, buying into the pre-report weakness. I should have waited until after the 10:30 a.m. EST inventory report as it was bearishly construed and we fell hard, post report, to close near the lows just above $2.70. Here is a daily chart of July Natural Gas:

    In just 7 trading days, July Natural Gas futures fell from the recent $3.15 high down to today's low and close at $2.70, a drop of 45 cents (14.3%). If you look at the chart action back in February and March, natural gas fell from higher levels and bounced off support at $2.73 in February, and around $2.80 in early March. When a price of $2.70 was reached on April 1st, July Nat Gas bounced 15 cents up the following day. Then it rolled over and worked down to support at $2.60, where it was able to stabilize and bounce back to just a penny shy of $2.80. Then July Natural Gas fell to $2.55, the recent low. The short-covering rally that followed carried July Nat Gas all the way up to $3.15.

    So now, July Natural Gas can either stop here at $2.70 and bounce back over $2.80, or it can work lower down to $2.60 and from there become so oversold, it can finally bounce back up to the $2.80 level like it did 6 weeks ago.

    Also, the last two report day Thursday hard smackdowns resulted in few cent drop over the next couple days, but then was followed by a rally that made back all that was lost in the smackdown. The last smackdown occurred on April 9th, and support at $2.70 was broken and July Natural Gas closed at $2.64. A 6 cent drop to $2.58 over the next couple days followed. But 3 days later it was back to $2.79. The bad Thursday report smackdown before that one was February 26th when July Natural Gas fell from $3.00 to $2.83 in a single day. Falling just 3 more cents over the next 3 days to $2.80, we would then get a 3 day rally back to $2.99, just a penny away from $3.00.

    I am hopeful that July Natural Gas will regroup and hold this support area over the next couple trading days, and slip no more than a nickel, maybe down to $2.65. And then by the end of next week, July Natural Gas should rally back 20 cents off the bottom, to the $2.85 area where we were trading before today's hard selloff.

    Crude Oil Formed A Bullish Hammer Today

    I have been saying that based on recent trading action, we should not trade under $57 in July Crude Oil, without first retesting resistance up towards $60. I should have stated that we should not get a close under $57. Today we traded down to a low of $56.51 and then rallied after the bullish Inventory report, to close up for the day and create a bullish hammer. We need a move higher on Friday to confirm this bullish reversal and we are up strongly overnight, so it is likely we get the confirmation I am looking for Friday, May 29th. However, on a rally to $59 to $59.50, I would take profits on up to half of the position one might be carrying in the triple leveraged ETN (NYSEARCA:UWTI). On a rally back towards $60, we might fall just short of the mark, and roll back over and eventually bottom in the $56 to $55.50 area. If one can lighten up in their UWTI with a profit, or can at least sell their low priced shares, one needs to do a partial sale to reduce their risk exposure. One analyst group that I deeply respect as they follow cycles like I do, is Main Street Trading. Their just released article, click here, tells us that they are looking for a 5 week correction lower in crude oil, and that this week is only week 4. If we shadow the 2009 corrective pattern, July Crude Oil futures are vulnerable to a test of the $55.09 to $53.09 range, according to the articles. Personally I am still hopeful today's low at $56.51 is enough of a correction, or if not, we will not fall lower than $55.50 to $56 if a new low is struck. Once crude oil bottoms, either this week of next, Main Street Trading is looking for a multi-week rally towards $63.62. Sounds good to me!

    Chart of UGAZ

    (click to enlarge)

    UGAZ is back to the area where I originally was recommended longs, below $2.20. Those who bought from $1.80 to $2.20, were rewarded when we rallied to just over $3.20 last week. This week I recommended buying under $2.40, but especially at $2.20 and lower, where we are now. No matter how low UGAZ falls in the next couple days, it should minimally return back towards $2.40 even if it is going to roll over to lower levels and eventually test the bottom just under $1.80.

    Chart of UWTI

    (click to enlarge)

    On rallies back towards $3.50 in UWTI, I would recommend lightening up on strength as we could require another week of consolidation before again working towards the highs. The ultimate low on this correction could cause UWTI to fall to as low as $2.80, $2.60, or even $2.40, if the lower limits mentioned by Main Street Trading is met. Be cautious, lighten up, and wait for a drop into the $2.80 to $3 area to get more aggressive about buying back. Trading in triple leveraged ETNs, one must utilize any and all rallies to lighten up, in order to raise cash that will be needed to buy shares on the next dip to average down. Even if selling at a loss, one must be willing to part with up to 50% of your position, knowing that you can buy the shares back cheaper and save yourself from ruin. If you cannot be disciplined then you cannot successfully trade the leveraged ETNs. Personally, I prefer the futures contracts over stocks, ETFs and ETNs, leveraged or not. With futures you can take advantage of movement that occurs overnight as futures trade around the clock. And there is no slippage.


    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.

    May 29 2:16 AM | Link | 4 Comments
Full index of posts »
Latest Followers


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.