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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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  • Gold Is Barreling Higher Towards $1300 To $1315 Resistance And Maybe A Lot Higher

    Everyone Is Now Jumping On The Bullish Bandwagon In Gold

    Gary Wagner is looking for gold to test resistance at $1300 to $1315, click here. Meanwhile, Carter Worth mentions on Options Action on CNBC that gold is rallying in the face of a stronger dollar and he is quite bullish, click here. Watching that tape I see Mike likes the metal more than the miners. He would apparently prefer trading GLD over the large miner ETF (NYSEARCA:GDX). However, earlier on Fast Money, Guy Adami recommended buying GDX. On the final call of Options Action, click here, Carter Worth suggests buying the Junior Miner ETF (NYSEARCA:GDXJ). So it appears everyone is now getting on the bandwagon. When that happens, we might be very close to a short term top. However, with this much bullish momentum, the ultimate top may not come for 2-3 months. Personally, I was very bullish in gold up to the $1260 and $1280 area, but now believe we should approach $1295 to $1300 in February Gold futures, but could roll over then and consolidate recent gains. I still like gold and the miners but prefer buying on dips now that we have come so far so quickly. Just take a look at the daily gold chart:

    Gold can thank the Swiss Bank for its meteoric rise above both the $1240 and $1260 resistance levels the last couple days. However, gold was rallying before the Swiss decided to no longer peg their currency to the Euro. Over the past 2 weeks, gold has rallied over $100 from the $1180 area to the $1280 area, supposedly on safe haven demand and expected increases in physical demand, to include purchases in the gold ETN (NYSEARCA:GLD). Despite seeing a nearly 3% rise in the US Dollar the past couple weeks, it is very impressive that gold still managed to rally 8.5%.

    But viewed from the perspective of about any other currency than the US Dollar, gold looks even more bullish. One currency that I was thinking would bottom last week was the Canadian Dollar. However, the Canadian Dollar just can't catch a break. Here is a quick look at the Canadian Dollar chart:

    Many of the miners are Canadian, and strength in the Canadian Dollar helps miners to rally, but the Canadian Dollar has not been strong recently. When our stock market tends to falter like it has been doing the last couple weeks, the Canadian economy can slow a bit, pulling down the Canadian Dollar. I still plan to go long the Canadian Dollar soon, when I get a buy signal. Thursday the Canadian dollar boomed when crude oil boomed, but both gave back their gains by the end of the day. I was glad to see that the Canadian Dollar managed to bounce off the lows on Friday.

    Is The Swiss Move A Game Changer?

    When there is market turmoil, like the dramatic currency moves seen in the last couple days thanks to the Swiss surprising everyone, there is one immediate reaction. Well, of course there will be traders and some un-hedged traders to go belly up, but when there is a market scare nearly all traders lighten up their positions. Since most were short gold and silver, to get out, traders had to buy, thus we had some nice short-covering rallies. Equities fell since most traders were long stocks and getting out caused selling. Most traders were short natural gas, so to lighten up their positions, they bought back their positions, helping natural gas to rally this past week (along with some cold weather). There was safe haven buying in both the US Dollar and in gold. It is too soon to know if the safe haven buying will grow some legs and keep moving higher, or not. All one can say is that for the first time in months, there is a strong bid under gold. Thus, I like buying gold futures on dips, along with the miners. I will now take a look at some charts of the gold mining ETFs as follows:

    (click to enlarge)

    The chart of the gold mining ETF (GDX) is breaking out to the upside. First resistance is now $23, but it could continue to $24 or even $25 before consolidating. Between our new year and the Chinese New Year, is a seasonally great time to be long gold and gold miners. This year is no exception. Just take a look at the weekly chart of GDX to compare January 2015 to January 2014:

    (click to enlarge)

    A year ago, GDX rallied strongly in the first 3 weeks of the year. That bodes well for a rally next week in 2015. However, in 2014 after consolidating a bit, in February, gold stocks would rally some more, moving from $20 to $27.50. This year GDX bottomed around $17 so a similar $7.50 rally projects a move to $24.50. Friday, GDX closed at $22.16, so it could easily rally another 11% by the first week of March. We can now take a look at the GDXJ daily chart:

    (click to enlarge)

    If you compare the Junior Mining ETF (GDXJ) to the ETF of the majors (GDX), you will notice that the Junior miners are not rallying as much and have not broken out above the $30 resistance level hit last November. In a healthy market, the Juniors would be leading. GDXJ should have gained more than GDX has, but right now it is not happening. GDXJ has struggled to close near the highs of the day, for the last couple days. GDXJ failed to close out at a weekly high on Friday. It is imperative that GDXJ moves above $30 this coming week, if the rally in the gold mining stocks is to continue. Bullish traders playing GDXJ or the triple leveraged bullish Junior Mining ETF (NYSEARCA:JNUG), need to watch closely for this breakout. If it does not come, then it could be time to start hedging one's bullish bets by buying leveraged DUST or JDST to balance out one's bullish positions in JNUG. As we rally into resistance at $30 and beyond in GDXJ, we should see more 2-sided action, and the teeter-totter trading strategy should start working quite well, if not next week, definitely the week after. I will be updating my thoughts on gold and the miners on StockTalk. Hope to 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.

    Jan 19 12:43 AM | Link | 1 Comment
  • Assessing Where Natural Gas Prices May Go In The Near-Term

    Natural Gas: It Is Always Darkest Before The Dawn

    The U.S. Energy Information Administration puts out a natural gas price forecast each month. The latest forecast found here, indicated that April Natural Gas in early January was averaging $2.88/MMBtu, compared to $4.19/MMBtu this time a year ago. What a difference a year makes! For the entire year of 2014, the average price of Henry Hub natural gas was a respectable $4.37/MMBtu, compared to an average price of just $3.73/MMBtu in 2013. So where is the EIA projecting the price of natural gas to be this year and next? Well, the agency is not bullish on prices, as they project the average price in 2015 to average $3.44/MMBtu, with a higher price of $3.86/MMBtu in 2016.

    It is hard to believe that just Monday of this week, nearby February Natural Gas futures bottomed at $2.783. Traders ran the stops under $2.80 and made many bulls capitulate, for fear of falling to lower support levels at $2.50 and $2.00. But thanks to slightly colder temperature forecasts, we got a very strong short-covering rally that culminated in a high today of $3.352 hit soon after today's large inventory drawdown reported at 10:30 A.M. EST. The futures contracts had rallied strongly in the last couple days prior to today's bullish reading (buying the rumor), so it was not surprising we would top out with today's announcement (selling the fact). I predicted just such of an outcome, which was easy to do since recently any and all rallies in natural gas are sold off.

    Yet hope springs eternal, as Andy Waldock (article found here) is not only looking for a rally in natural gas to the middle of February, his article shows the historical seasonal tendencies for natural gas (chart supplied by Moore Research) to rally strongly to the 3rd week of March. Again, the seasonal chart shows a tendency for natural gas to top out in mid February, dip for a week, and then rally strongly to the 3rd week of March. Since we find ourselves at such unbelievably cheap price levels, it would not be difficult to imagine that natural gas would move upwards until the middle of February, take a dip for a few days, and then resume a move higher to the 3rd week of March. It is surely something to watch out for.

    Where Does Today's Rally Leave Us?

    At firstenercastfinancial.com, today's natural gas summary, click here, explains that this week's natural gas rally was caused by freeze-offs at the well heads. It finally got cold enough to not only bolster demand, but to also cause cuts in supply totaling 2 billion cubic feet per day. As long as we stay cold and supply is limited, natural gas prices will remain firm. When the cold passes then supply levels could rapidly climb and prices will surely top out. With the extreme volatility in natural gas prices, I would expect many more short covering rallies and selloffs before this winter season ends. Traders should take advantage of these pops in the tripled leveraged bullish UGAZ by taking some profits on low priced shares and likewise hedging by buying some triple leveraged bearish DGAZ when it is cheap. I quit trading natural gas when it topped out in November, as I did not like the fact it could fall so easily back under $4.00/MMBtu after hitting above $4.50/MMBtu. I figured natural gas had a low probability of falling briefly into the $3.35 to $3.50 range, but could not fathom falling below $3.00/MMBtu, in the middle of winter no less! Through now and the middle of February 2015, I prefer buying the dips in UGAZ, and I may lightly scalp some mini 1/4 size natural gas contracts. However, on strength, I will also go short for quick swings lower as any and all rallies in natural gas don't last. The EIA is probably right that natural gas bulls will have to get in and out quickly as the oversupply situation may not get resolved for another year.

    The secret is not to marry a position, but face each day fresh and anew. Try and access which side is winning on that day and join the winning side. It is preferred that one does not hold a position overnight, but if one chooses to hold overnight, liquidate the position over the next day or two. On sharp intraday dips in UGAZ, buy a few shares and then liquidate on the recovery bounce. On sharp intraday dips in DGAZ, buy some shares and then liquidate on the recovery bounce as well. With natural gas making intraday swings of 5 to 10%, the leveraged ETNs of UGAZ and DGAZ can swing up and down 15 to 30% in a single day. If your account does not allow you to daytrade, then try to swing trade over a couple days, averaging down in both UGAZ and DGAZ, and liquidating on rallies in each the following day.

    And remember, less is more! Professional poker players play a very small percentage of hands, but then hit it hard when things are strongly in their favor. Professional card players wait for the really, really high percentage plays. Try to catch a nice swing just once or twice a week and be happy even if the gain is just 2-3%. All gains, large and small, can add up very quickly.

    We can now take a quick look at the charts of UGAZ and DGAZ.

    (click to enlarge)

    Despite the fact UGAZ closed lower today, the gap left from Wednesday's bullish action was not filled. Bulls do not want UGAZ to slip back under $4 and fill the gap as that would project falling back to the bottom and likely making new lows. Also, it is important that UGAZ closes up on Friday, January 16th, so that today's bearish Harami Japanese Candlestick pattern is not confirmed. But if it should close down, I would especially not like to see a close below $4.39 in UGAZ, (Wednesday's low). If UGAZ should close below $4.39 then anyone who went long on the big Wednesday gap up, would be losing money and liquidations could cause a further selloff. We can now look at the daily chart of DGAZ:

    (click to enlarge)

    On the cold snap in November, DGAZ fell down to a low of $2.50, only to rally to $8.92 on Monday of this week. Today, just 3 days later, DGAZ dipped briefly under $5. Personally, I would prefer to wait for around $4 or lower to begin scalping on the long side in DGAZ in any real size. However, if one is overweighted in UGAZ, one needs to strongly consider buying some DGAZ on this dip in UGAZ. When natural gas prices correct back down, it will cause DGAZ shares to rise and create profits to help offset UGAZ losses.

    Summary:

    It is okay to try and predict where natural gas will be tomorrow, next week, or next month, but very difficult trading on that prediction. So I am not going to make any predictions right now. However, I am going to watch natural gas very closely for clues as to where the next direction it is heading, and try to join the winning side.

    The bulls are in charge 30% of the time in about any market. The bears are in charge 30% of the time as well. On days one side has the advantage, jump on the winning pony! About 40% of the time neither side is winning as the market is range bound. One can just not play those days and take a break. Or for others, they might want to use the ranges to play both sides, buying UGAZ or DGAZ whenever either is on its lows, and then take profits when one side rallies back up.

    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.

    Jan 16 2:00 AM | Link | 2 Comments
  • Five Stocks That I Am Following: TWTR, RIG, CLF, FCG & IAG

    Twitter (NYSE:TWTR) Needs To Close Up This Week To Establish A Bottom

    (click to enlarge)

    The above weekly chart of Twitter (TWTR) shows that we ended a 13 week downtrend this past week, with finally a strong up week. Will the strength last? Who knows. Throughout the 13+ months that TWTR has traded, it has had two major down drafts. During the down drafts there were several times that TWTR would close up one week and form a nice white Japanese Candlestick candle, but then would fall the next week forming another red candle. Only when there were 2 consecutive white candles was the up move sustainable.

    So in review, the good news is that TWTR finally did close up this week, but it is important for the bulls that TWTR continues to gain this coming week. If it does then there is a good chance a bottom was formed at the $35 level. If we instead close down this coming week, then last week's rally was nothing more than a short-covering bounce and TWTR is probably headed to $35 again, and possibly major support at $30.

    Too Soon To Buy Transocean (NYSE:RIG) Or Other Drillers

    (click to enlarge)

    You can see from the above daily chart in Transocean, Inc. (RIG) that the selling has been absolutely devastating. However, in the middle of December, RIG found support at the $16 level and then rallied back towards $20 in a week. It has taken 3 weeks to then fall back towards support at $16. Despite lower oil prices week after week, RIG has held support at $16 for 4 weeks. It tells me that most if not nearly all of the bad news has already been factored in. Crude oil will likely continue lower and will probably not bottom for at least the next 3 to 6 months, so I have not yet picked up RIG in the $16s or Seadrill (NYSE:SDRL) which is now below $10! However, if crude oil can find some stability in the next couple weeks around $40, we could get another nice bounce in the deep water oil drillers and one may be able to start nibbling on these soon. Long-term, I am more constructive on the energy sector than about any other sector out there, and I definitely want to get involved when I see some signs we are bottoming.

    Cliffs Natural Resources Inc. (NYSE:CLF) Is Trying To Form A Base

    (click to enlarge)

    Back in October, CLF bottomed around $7 and then proceeded to rally back above $11. It has now fallen to a low of $5.63, with good support now at the $6 level. It would not be much of a stretch to see this stock back at $9 on a further short-covering bounce, even if it falls back again towards $6. Anyone buying CLF under $7 should be happy they did if they hold the stock for a nice sized bounce.

    Natural Gas Stock ETF (NYSEARCA:FCG) Is Trying To Bottom

    (click to enlarge)

    FCG is now showing good support around $10 and would appear to be a nice buy right in here. If natural gas prices should catch a rally thanks to colder than expected temperatures over the next few weeks, FCG should get a nice bounce. Looking long-term, it s hard to imagine this ETF dropping much under $10. It is much, much safer buying FCG than trying to time the elusive bottom in triple leveraged natural gas ETN (NYSEARCA:UGAZ).

    Iamgold (NYSE:IAG) Continues To Be My Favorite Gold Mining Stock

    (click to enlarge)

    IAG has hit my initial target of $3.25 to $3.40 and could pull back towards support in the $2.60 to $2.80 area. However, I continue to like the action in this stock over any other miner. My son tells me that IAG is the largest holding of the Junior Miner ETF (NYSEARCA:GDXJ). It is also a small member of the Major Gold Miner ETF (NYSEARCA:GDX). Seems that everyone wants a piece of this stock.

    Being a Canadian company, the price action is hurt when the Canadian Dollar loses ground to the US Dollar as has happened recently. However, the Canadian Dollar is approaching some major support and the US Dollar is facing some pretty stiff resistance ahead, so going forward, the Canadian Dollar could bounce back up, helping to support the price of IAG.

    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.

    Jan 11 8:05 PM | Link | Comment!
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