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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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  • Interesting Agriculture Trading Opportunities For Week Of May 11-15, 2015

    In doing some chart analysis, I uncovered some interesting chart patterns that could provide for some trading opportunities for the coming week of May 11-15, 2015. Here is what I found.

    Live Cattle Could Begin a $3 Rally This Coming Week

    (click to enlarge)

    Excuse my messiness, but the above daily chart of August Live Cattle, I found quite interesting. First, you will notice how at the very left hand side of the chart, back in December 2014, August Live Cattle bottomed just under $144. Then there was a rally of $8 (traveled up 4 lines with each line representing a move of $2). Then after a 2-3 day correction, August Live Cattle bottomed in the low $148s, and then rallied a similar $8, to top out just above $156. When playing the meats (Live Cattle & Lean Hogs) as well as many other commodity markets, I tend to see this kind of symmetry unfold all the time. Here we had a rally of $8, a correction of about $1.50, followed by another rally of $8.

    Next move over to late February 2015, where I marked a solid circle at the center of the chart at the $138 price level. August Live Cattle futures bottomed around $138 and then rallied almost $8 (actually about $7.50), and then corrected for a week down to the low $142s in mid March, and then rallied slightly over $8 to the high $150s. Not perfect, but close enough. Knowing how much the market has rallied on the first move up from the lows, one can project how much to expect to see on the second leg up.

    That brings us to the current setup in August Live Cattle futures that shows a low in April 2015 in August Live Cattle at $144. Again I put a solid circle under the support line scribbled on the above chart. From that low, August Live Cattle rallied about $6 (3 lines on the chart). Then there was a consolidation where we fell back for about $2. Bottoming around $147, we are now due for a rally of another $6 which should take us up to $153. This rally should commence this week.

    Not only are the price moves symmetrical on this chart, but time frames are also symmetrical, the number of trading days it takes to complete the legs of the rallies. Back in December 2014, August Live Cattle rallied for about a week, corrected 2-3 days and then rallied for another week. Back then, volatility was high and moves were completed quickly. When August Live Cattle bottomed in February 2015, volatility decreased and moves took longer to occur. However, the time it takes to move on the first and second legs should be about equal, and in fact they were. In February 2015, August Live Cattle rallied 6 days and then worked higher until the 10th day moving off the bottom, corrected down for about 5 trading days (1 week) and then topped about 5 days later but went sideways and retested the high on the 10th trading day again.

    The move off the February bottom took 14 days to top and correct to the intermediate low. In April's bottom, we rallied and then hit the top and corrected to the intermediate low on the 13th trading day. That low came on Thursday, May 7, 2015. Like in February, the first day back up was a small white bar, similar to Friday's small white bar. However, this was followed by 4 large range explosive days in the middle of March 2015. If we follow the same pattern, August Live Cattle should break above the solid $150 resistance level beginning on Monday, May 11, 2015, and explode towards the $153 level by next Thursday. It will be fun to see if this occurs. I plan on buying August Live Cattle on Monday in anticipation of moving strongly higher this coming week.

    Soybean Meal Could Move Higher Beginning The Week of May 11-15, 2015.

    If you look at the long-term chart of Soybean Meal, you will see that we are presently trading near long-term support levels. With the new crops just being planted now, it is normal to see a late Spring/early Summer weather premium placed in prices which should remain until a large bountiful crop is assured. Right now there is no premium priced in the market. That could soon change. Here is a monthly chart of Soybean Meal to show how we are indeed at historically low prices:

    The above chart shows where soybean meal traded going from the middle of 2006 through April 2015. Notice back in 2007, soybeans had a black bar on the 4th bar (April) where a low was scored at $190.90. From that low we see a 15 month rally to above $450.00. Again, in April 2008, a low was struck in April at $300, followed by a rally of over $150 to the July 2008 top. Then in 2009, the bottom came early, in February, at $264. April 2009, was spent rallying the entire month, a whole $50 from $292 to $342. May continued solidly higher until a June 2009 top at $433.

    In 2010 the low cam in March, at $250. April 2010 was a solid rally just under $300, a May correction and then rally for the remainder of the year to the $390 level. In 2011, we started out at elevated levels and went sideways without any real pattern, so I will skip this year. That brings us to 2012, where we see that the low of the year was in January, just under $300, having actually bottomed in December 2011, at $275. In 2012, soybean meal rallied straight up from January thru May, hitting a high of $435. After falling back to just under $400 at the beginning of June 2012, we rallied and double topped at $554 in both July and September. Then we fell back during harvest and got ready for the next low. That low came in April 2013 at $390, and the rest of the month was spent rallied. The rally continued for 3 more months till we topped out in July 2013 at $545. We spent the remainder of the year going sideways in a large range from the low to high $400s.

    When 2014 arrived, soybean meal was still trading at lofty levels and we had a rally that stretched from the beginning of January thru the end of April, moving from $414 to $505. I will ignore 2014 in my analysis as it shows action at elevated levels and we currently are at low levels. Like in 2011, the setup in 2014 was the exception. We are currently at low prices in the April/May timeframe, having dropped recently to low price levels, and we need to find years that match the same criteria.

    Anyway, in 2014 we went sideways until starting a bear market in early June. That bear market has continued to the present. From just above $500, soybean meal would fall a total of $200, to just above $300. However, we did not fall straight down. There were 2 very tradable rallies in between the high and the low. The first rally started from a July 2014 bottom of $376, and continued into an August 2014 high of $464. The other rally started with a low of $303 in September 2014, and continued for a couple months till topping at $417 in November 2014.

    But by April 2015, we scored a low of $307.30, which should be about the low we have for now, as I anticipate seeing the normal seasonal rally into June 2015. Although soybean meal could keep falling to as low as the $250 level, there remains good long-term value in the $250 to $300 level. One definitely wants to be scalping from the long side right now, as we see prices in the low $300s. I will conclude with a weekly chart:

    (click to enlarge)

    Looking at the weekly chart of Soybean Meal, the third week of 2015 was a large black candle. Soybean meal fell hard. Then the next week we bottomed and reversed up off the low. I marked that week as a "1" on the above chart. Then we rallied for three more weeks but ended up closing about unchanged, with the 4th bar marked with a "4". This corresponds well with recent action where we again sold off but made a weekly low in the middle of April and a reversal higher that I marked "1". The next 3 weeks we have gone higher but fallen back each week to close about unchanged, just like before. This past week was marked as week "4". If we follow what happened after the previous 4 weeks of consolidation, we should get a nice soybean meal rally starting next week. There is a grain report on Tuesday that could cause some problems for bulls, but following that or before, we should see a seasonal rally to build in some weather premium in to prices. I may buy some July Soybean Meal futures this coming week, especially after Tuesday's grain report is behind us.

    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.

    May 09 6:44 PM | Link | Comment!
  • How I Called The Bottom In Natural Gas, Maybe For 2015

    Sunday afternoon on April 26, 2014, I wrote an article, click here, where I recommended buying natural gas futures, as well as the natural gas producers ETF (NYSEARCA:FCG) and especially UGAZ. Then on May 1, 2015, I wrote a follow-up article, recommending buying UGAZ on the next dip in natural gas prices. That dip occurred as expected, following the weekly inventory report announcement on Thursday, May 6, 2015. I bought June Natural Gas mini contracts from $2.755 down to $2.720. I took profits today on a fabulous break-out rally that occurred today. Here is a daily chart of June Natural Gas futures that is current to the time I wrote this article:

    (click to enlarge)

    Today June Natural Gas futures broke above the recent high of $2.824, confirming a bottom has formed. This could be "the" bottom of 2015". Thus all dips in UGAZ should be a buy and scaling in on all dips is advised. Here is a daily chart of UGAZ:

    (click to enlarge)

    Although it would have been better had you taken my advice and gotten long under $2, UGAZ can run significantly higher and should still be purchased on all dips. Scalping from the long side is advised. From the April 27th low of $1.74, to the May 4th high of $2.52 is a gain of 78 cents. If you add 78 cents to the May 7th low of $2.22, you get $3.00. Now I have a target of $3.00 in UGAZ, which could be met within the next week or so. Buying on dips every 10 to 20 cents lower to scale in buy and scalping from the long side should work out well. I like buying in the $2.40s and am hopeful the $2.22 support level will hold for now. One can also try buying on a further rally, but I favor trying to get in on dips. If you don't like trading a leveraged vehicle with slippage, a purchase of the natural gas producers, scaling in on dips, should also work out well. I will close with a chart of the natural gas producer ETF :

    (click to enlarge)

    If you buy a few shares of FCG at $11.50 and scale in buy every 25 cents lower, there should be 50 to 75 cent rallies to swing trade.

    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: FCG, UGAZ, DGAZ
    May 08 1:19 PM | Link | 4 Comments
  • Cycles Show Gold Bottoming Now, Or During May Or June 2015.....Or Not!

    In checking out articles today on kitco.com and elsewhere, I noticed that Avi Gilburt is holding out hope for a near-term bottom in gold, click here. Main Street Trading is also cautious, still waiting for gold to bottom, but realistic that a $50 drop might occur first, click here. Then to not help things much, Adam Button tells us how May and June are seasonally the worst months for a gold rally, click here. And if you have not had enough cycle analysis already, Fred Starkey tells us that the week starting May 18th should be a high mark for gold, which should then be followed by a drop and major low due the middle of June, click here.

    So if you clicked on all the article mentioned, you will probably be very confused by now. That is OK. It really does not matter if we have bottomed in gold, or we have more work to do. We are at the lower end of a trading range. Support will hold or it will not. If it holds you are getting long gold near the lows. The miners appeared to have already bottomed, which gives me hope that support will hold. Even if support holds we are vulnerable for a $50 drop to the lows, but that is fine. If they should make a marginal new low running stops, it should still be a false breakout down and quick short covering rally of over $100 off the lows in very short order. The bulls should almost want the bottom to be broken to get that massive short-covering rally that likely follows.

    But even if I am wrong and we end up falling $100 to $120 lower than current prices, we should quickly bounce back towards $1200 even if we are heading lower. Either way, the bulls should have no problem getting out at breakeven or with a nice profit. The risk to the downside is minimal, maybe $120, as I see it. The risk to the upside is limitless, and realistically we could see $200 to $300 to the upside without much difficulty. We are too extended in the current gold bear market to be bearish, both in time and in price.

    Scalping Mining ETFs From The Long Side Should Pay Off!

    As we weakened into the monthly employment report, which came out today, gold miners corrected lower, offering a great buying opportunity. During Stocktalk on Wednesday, May 6, 2015, I suggested buying some shares in the triple leveraged bullish gold mining ETF (NYSEARCA:JNUG), at $21.45 or better, with twice as many shares to be purchased on Thursday at $20.55, giving an average price of $20.85 if all shares filled. Here is the daily chart of JNUG:

    (click to enlarge)

    Wednesday's low was $20.88, but JNUG closed at $21.34. I bought in the $21.20s. On Thursday, I bought some JNUG in the premarket in the $20.40s, and added later more shares in the $20.20s and even caught some shares just under $20.00. With my average price of $20.55, I sold half my position when we rallied back to the $20.70s. In a different account I bought at $20.10 on the dip to the lows, for a quick scalp, but decided to hold when the nice bounce occurred. Then on a rally to $21.00, sold some more shares, and finally at $21.35 liquidated all shares in both accounts.

    When the employment report came out with a gain of 223,000 jobs for April (inline with expectations) but March was revised lower by 41,000 to a revised number of 85,000 jobs, the weak numbers caused gold to surge and JNUG to trade in the premarket as high as $22.35. But within about 10 minutes, a low price of $20.85 was scored. Then bouncing to $22.23, JNUG double bottomed just under $21.00, and now has a high of $22.39. I am now recommending buying JNUG at $21.50 and lower, and aggressively playing long around $20.00. JNUG should be a great long scalp for the time being.

    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: JNUG, NUGT, GDX, GDXJ
    May 08 12:38 PM | Link | 2 Comments
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