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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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  • Burger King (BKW) Could Be A Buy Under $30 And Demands Following

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    The above weekly chart of Burger King (NYSE:BKW) shows a nice upward trajectory, as it has been a favorite of investment funds (think Bill Ackman's Pershing Capital's 10.8% stake). The chart shows a double top at $28 which was overcome this week when BKW announced they would like to buy out Canadian based Tim Hortons, a coffee/donut place (think Dunkin Donuts). For a good video that explains the challenges BKW faces, click here. Burger King fell back today a bit thanks partially to some negative feedback to the deal on social media sites. The tax inversion thing will probably just become a minor distraction as the impact will not be that great in the long run, even if the headquarters of BKW is moved to Canada. Because the deal has expansion and competitive advantage potential for BKW as it tries to compete with McDonalds and other rivals, I see the stock getting bought now on dips, and with today's selloff, it could provide some nice day trading scalping opportunities.

    It is very difficult to actually effectively run a boycott campaign against a company. Several attempts have been made to hurt Walmart, McDonalds, and others, with little effect. Burger King is being proactive and should squelch the negative vibe pretty quickly I would assume which should remove or at least reduce the negative cloud hovering over the deal. Now lets look at the daily chart:

    (click to enlarge)

    The stock popped on Monday from $27.11 to $33.97, but has now fallen back to close Tuesday at $31. $30.50 is about halfway in the middle and that is where I might try to buy a few shares with the intention to buying more on any further weakness. The large gap that was left on Monday should provide excellent support on dips. It will not be easy to fill the gap and traders should be buying the stock any time it dips into the gap area.

    As a long time day trader, I can say that breakout situations can be great places to make a quick return. Volumes are elevated as the stock is in the news, and volatility can provide great movement. I am looking forward to playing a positive breakout story as opposed to buying a falling knife stock on negative earnings/news/events, that I typically play.

    It is too early to say how exactly I will play BKW but generally, one can begin scale-in buying at say $30.50 and then do incremental buys every time BKW dips 50 cents lower. I would expect that the stock should stop falling somewhere between $29 and $30 and then attempt a recovery. If things work out well for the company, I can see BKW eventually overcoming the $34 resistance and trading to $37 or even $40, despite the current nosebleed P/E ratio of 43. You have the various funds involved like Bill Ackman, and $3 billion of financing by Warren Buffett, along with the tax inversion thing, etc., so trading should be volatile with plenty of zigs and zags. Day traders like movement and there should be plenty of movement in BKW in the short term and long term.

    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 BKW over the next 72 hours.

    Tags: BKW
    Aug 27 2:40 AM | Link | Comment!
  • Creating A Game Plan For Trading The Junior Miners Leveraged ETF (JNUG)

    Formulating A JNUG Battle Plan

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    The Big Picture

    The above weekly chart of the triple leveraged Junior Mining ETF (NYSEARCA:JNUG) shows all trading since this ETF began trading about 11 months ago. We started with a quick rally to $42.96, with a selloff to $13.10 just 6 weeks later. After going sideways between about $13 to $16 for three weeks, in less than 7 weeks JNUG again hit a high of $41.38 in February 2014, and was caught in a trading range from $30 to $40 for a month, before topping out at $43.14 in March. From that high, just 5 weeks later JNUG fell to just under $16, but then for 4 weeks played in a range from $16 to $21 before finally spiking to a low of $13.32 at the end of May 2014. From that low, JNUG would rally to $30.63 in just 3 weeks, followed by a high of $36.00 just 3 weeks later. JNUG has now fallen for the past 6 weeks and we are lower at the beginning of the 7th down week.

    What does this all tell me. A lot. It tells me that since JNUG began trading, there were two previous selloffs. Most of the pain to the downside ended in 6 weeks and then in 5 weeks. Since we have now fallen for 6 weeks through last Friday, hopefully most of the current pain is exhausted. It is a small sample size, this now being only the 3rd selloff, but it should still be encouraging to the bulls. Also the bulls should take heart in the fact that the last three peaks in JNUG are $42.96, $43.14 and then a peak $7 lower at $36.00. It would seem logical to assume that no matter how low JNUG should fall during the current selloff, once we bottom, we should bounce quickly back to $29 (subtracting $7 from the last $36 peak). If we miss the last high peak by a similar 16.2%, it would project a high of $31.20. I will split the difference and say JNUG should bounce back to $30 in the near future, regardless of where it should bottom. And the bottom should happen now.

    A Caveat

    Well, what could go wrong with the above analysis. Plenty. You see, another observation I made in looking at this weekly chart, when JNUG swings to a high or swings to a low, it will consolidate for 3-4 weeks before reversing direction. This tells me that I don't have to be a hero and get too heavily invested too early trying to catch a bottom in JNUG, or picking a top in the triple leveraged bearish Junior Miner ETF (NYSEARCA:JDST). The position traders can wait for awhile and see a JDST bottom form and then buy 3 to 4 weeks down the road.

    How could JNUG continue to fall? The implications of this 3 to 4 weeks of sideways action before a trend change, could mean that when we recently hit a high of $36 in early July 2014, one could describe the next three weeks as merely a trading range trade between $22.68 and $30.88 and not a downtrend. Breaking down the first week of August, to strike a low of $21.15 could be considered week 1 of the down move and that would make the current week just starting week 4. We could therefore fall for another week or two, before going sideways for 3-4 weeks and then start a quick rally back towards $30. But even in this bearish scenario, a recovery to just $30 from the current $22.50 or $21.86, would still be a gain of over 33%. I still don't want to suffer that much JNUG pain, and you don't either. So let us take a look at what could be ahead if JNUG chooses to continue to fall.

    The Daily Chart Projects A Bounce Off $19.30 and again at $16

    (click to enlarge)

    Back on March 24, 2014, JNUG fell from $30 to $21.50 in a single day, closing at $21.88, a price similar to today's close of $21.86. Back on March 24th, JNUG had fallen for 6 of the last 7 days, and the value was nearly cut in half from $43.14 to under $22. Comparing that to now, we have fallen in 9 days from a high of $27.34 to today's low of $21.85. If we should now continue lower, the first stop should be the $21.15 spike low of August 5th, or $20.50 to $20.70 where JNUG found support back in the middle of June.

    One thing that is very comforting, is the fact that the March 24th close of $21.88, was followed by a small up day. The 2nd day to follow was another down day to $19.61 where the bleeding stopped. JNUG would then go sideways between $19.21 to $24.75 for two weeks. JNUG bounced several times from the low $20s to above $22.50 the following day. So now that we are presently in a similar value zone, one would expect that JNUG would also show similar resilience and bounce from maybe $20.25 to $22.50 or $23.00 for a couple weeks, should we fall a bit more. And even if JNUG should fall after that to $16, it should again be resilient enough to bounce to above $21 for another couple weeks. And don't forget, there is a rally to $30 likely in our future at some point.

    Today's Trading

    I started today with a few shares of JNUG left over from Friday, around $23.10. I added early today at $22.90, and $22.60, but bought again at $22.30 and $22.15. I bought bigger positions at the lower prices and my average today was $22.52 when we got a rally back towards $22.60 where I dumped out of half of my position at breakeven at $22.55, only to buy shares back again at $22.37 and $22.25. My average going into the close is $22.42. On a rally back to $22.50 in the morning, I will dump half of my position at breakeven to free up cash. NUGT has been down for 5 straight days and looking at the above daily chart, one can see how one can find 4 or 5 down day selloffs, but virtually never 6 straight down days. It is like an unwritten rule. The last time we fell for 5 days was back on August 4th. The next day NUGT slipped further down to $21.15, but reversed and closed up 77 cents on August 5th. If tomorrow, Tuesday, August 26th, trades in a similar fashion as August 5th, NUGT could fall to a low of $20.10, but would reverse and close at $22.60. Wednesday, August 27th, NUGT would trade to above $25.00. It looks like we just have to get through the morning.

    Summary

    I went through this scenario to show how I come to decide to catch a falling knife stock or ETF like JNUG. I look at what can go right, and what can go wrong, and decide if the odds are in my favor catching the falling knife. The current bearishness in the Junior Miners looks overdone and although there could be a bit of rough sailing over the next couple days or even weeks, as a bottom is formed, JNUG tends to be quite resilient and has great bounce potential, making buying of the dips usually quite financially rewarding.

    Just looking at the recent peak of $36, JNUG fell $11 in 3 days to $25, but then bounced in 2 days to $30.88. Just 5 days later, it hit a low of $22.68, followed by a pop in 2 days to $29.30. Just 6 days later was the August 5th reversal day, with a low of $21.15, and a bounce on August 6th to $26.28, and 4 days later the high of $27.34. From that high of $27.34, we have fallen for 9 trading days to today's low of $21.85. Whether that is the low, or $21.00, or even $20.00 is the ultimate low on the current downdraft, we have potential to pop at least $5 in short order off any low. That makes the next swing high at least $25, even if we should fall to $20, which I don't believe we will see.

    In case we should totally fall apart over the next couple weeks, I am very confident we should bounce off of the next support zone of $16. When you add $5 you only get back up to $21 or maybe $21.50. So you want to space out your buys so you have some cash to buy at extreme lows, so you can lower your average price enough to still benefit and make money on the $5 rebound, regardless of the actual bottom.

    Hope this is helpful.

    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 JNUG.

    Aug 25 9:12 PM | Link | 7 Comments
  • Review Of Stocks I Have Been Trading & What I See For The Week Of August 25-29, 2014: SEAS, GRPN, KING, JNUG, UGAZ

    SeaWorld Entertainment, Inc. (NYSE:SEAS) Looking Great!

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    When SEAS gapped down hard on August 13, 2014, after posting disappointing earnings, I felt the selloff was overdone and recommended buying in the $18s, click here. Thanks to the upgrade by FBR Capital Markets on Friday, click here, the stock moved strongly to the upside and nearly reached my $21 short term target. I got out of the stock on Thursday when SEAS would not move strongly above $19, but got back in on Friday at $19.46 when $19.50 was taken out. I added additional shares going into the close. Early next week I am looking for a move to above $21 to try and partially fill the wide gap. Should we dip under $20, I will be adding more shares as a major bottom should have been made and I am raising my near-term price target from $21 to $24.

    I Like Scalping Cliffs Natural Resources (NYSE:CLF) From The Long Side

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    Casablanca took over the board of Cliffs Natural Resources (CLF) and caused the stock to move from the $14s to $18. For the past two weeks, the stock has fallen back as shorts have resold into recent strength. On Friday, CLF reported various upcoming one-time expenses, click here, that caused the stock to fall under $16. I like the stock under $15 now, and would back up the truck in the $14s. However, since the stock has been in a 2-week downtrend, one needs to show some caution and buy small so one can add more shares on weakness. This stock should be an excellent candidate for naked weekly put selling using $15.50 and $15 strikes. If CLF falls some more, one will be exercised at a low strike price and the premium received reduces the effective purchase price even further.

    GRPN Is Still A Buy Under $6, Trying To Overtake $6.30 resistance

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    Groupon (NASDAQ:GRPN) Is Another Stock I recommended buying following bad earnings. This catching-a-falling-knife stock was a great buy from $5.75 to $6, but has been unable to overtake resistance at $6.30. Eventually it should bounce to $6.50 and ultimately fill the gap left from $7.07. The stock trades a bit slow for me, but I like owning it below $6, as well as on a breakout above $6.30 and $6.50.

    KING Gapped Up On Friday On Bullish China News

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    Thanks to a partnering deal with a Chinese company, KING gapped up on Friday. This vindicates me getting into the stock following recent disappointing earnings. I anticipated getting the Chinese news soon, and felt it would pop the stock. However, I like the chart pattern of SEAS much better, and will probably not buy KING unless I can get the $13.50s. Working into the gap area left on Friday's pop, should support the stock should KING dip some early next week.

    Looking For Outperformance Of Junior Miners To Continue

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    Despite recent weakness in the gold metal, the triple leveraged Junior Mining Stock ETF (NYSEARCA:JNUG) has been a great instrument to scalp from on the long side. What makes it so good, is the fact that when one buys on dips, JNUG pops back up to let you out with some nice scalping gains. But being in a downtrend, JNUG does not get away from you. It falls back to let you buy it again and again. A slow fading entity like the current action in JNUG is my bread and butter trading play that I thrive on! I expect gold to stabilize soon, and to move up some with more global unrest, along with profit-taking in the US Dollar. Although JNUG could fall to $20 or even $18, all dips should remain a buy with my short-term target of $26. I will be aggressively scalping from the long side in JNUG next week!

    UGAZ Is A Buy On All Dips!

    (click to enlarge)

    Natural gas has been trading in a narrow range from the low $3.70s, to just above $4.00 recently, allowing one to scalp from the long side in UGAZ on dips. Buying in the low $14s and selling out at $15 and $16 has been the money trade for the past 5 weeks. I expect this to continue with an eventual move higher towards $18, $20 and beyond by next winter. Although I don't like holding the triple leveraged mining ETFs of NUGT/DUST and JNUG/JDST for longer than a day or two at a time, I feel very comfortable holding triple leveraged UGAZ long-term as I feel the downside is quite limited. While trading all triple leveraged ETFs, one must space out buying, and diversify so one can take advantage when the triple ETFs get extremely cheap.

    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 24 2:49 PM | Link | 5 Comments
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