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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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  • Where Are Natural Gas And Crude Oil Going Now?

    Natural Gas

    In my last article, click here, I was looking for a short-term top in natural gas around March 19th and it came in on March 18th and then began falling hard on March 19th and has continued to slowly weaken as time goes on. I had previously looked for an April bottom in natural gas and found an article by Main Street Trading that agreed with my analysis, but added the March 19th top to the scenario. Well, Main Street Trading has now posted an article giving there latest thoughts found here. In the article, Main Street Trading first covers Crude Oil and then gives their latest thoughts on Natural Gas. They indicate that unless natural gas can move back above the March 18th high of $2.949, then it will continue to weaken and the bottom is not in. Here is a daily chart of May Natural Gas:

    On Friday May Natural Gas finally took out the February low by a couple cents. This projects a move to lower levels. However, just as natural gas tried to bottom in January around the $2.80 level and finally fell to the mid $2.60s before finding support (a drop of 15 cents), May Natural Gas could now drop a similar amount and find support at $2.50. Into that support area I plan to be slowly buying some futures contracts but will buy the June contract to that I have plenty of time to allow natural gas to find its Spring bottom. When I get some indication that we have reached a temporary bottom, which I project should come in around $2.50, I will likely buy some shares in the triple leveraged natural gas ETN (NYSEARCA:UGAZ).

    Crude Oil

    In my last article, I also called for a temporary bottom in crude oil, which I was lucky enough to hit right on the money. Crude Oil has since rallied an impressive $8 off the bottom, however, it is has significant resistance at the 55 day moving average of $52.25 as indicated in the Main Street Trading article, and again at $55. Here is a look at the daily chart of May Crude Oil:

    On Friday, there was significant profit-taking on the recent May Crude Oil longs and also traders who had covered their short positions decided to get short again above $50. However, I prefer scalping from the long side of Crude Oil right now and prefer buying the energy ETFs on further weakness. I anticipate $47 in May Crude should now provide significant support and will look to begin buying some futures contracts in that area. I will gradually scale in my buys. For those who don't trade futures, the energy ETFs should provide excellent value on any further weakness. I agree with Main Street Trading that one needs to buy into the current dip. I expect to be buying some May Crude by Tuesday.

    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.

    Mar 28 12:54 PM | Link | 3 Comments
  • Update On Natural Gas, Crude Oil & Gold

    This is an update on my last article written on March 14th found here. In that article I mentioned how there were exciting trading prospects in three particular markets and I was sure correct. It has been exciting and we have hardly gotten started. I will cover each market now, starting with natural gas.

    Natural Gas Is Working On Forming A Short Term Top

    (click to enlarge)

    The above chart is the daily chart of April Natural Gas, updated through the present time when I am writing this article. In my last article, I was calling for a March 19th top. Well, we did indeed rally into Thursday, but the actual high came on Wednesday at $2.935. On Thursday with the inventory report coming out, it was mostly a downer. However, today, Friday, we are rallying back towards $2.90. I am still looking for a high into the current time frame in natural gas, but feel that natural gas, crude oil and gold are all somewhat tied together as they all jockey against the action of the U.S. Dollar. Natural gas is popping today along with crude oil and since crude oil could snap back a bit further off the low, I cannot rule out a further rally in natural gas, towards the $3.00 to $3.10 level. I am still looking for a top in the next couple days in any regards, and am then looking for a 4 week selloff to test the old lows and possibly make a marginal new low.

    April Crude Oil Stopped Dropping When It Hit $42.03

    In my last article, I mentioned that if you were less anxious to get long April Crude Oil (which turned out to really be catching the proverbial falling knife) to wait to buy the energy ETFs when April Crude Oil hit $40 to $42. Well, we stopped at $42.03, missing the top of my target range by just 3 cents. We then rallied on the Wednesday Fed announcement, consolidated lower yesterday, and today we rallied back up quite nicely, taking out Wednesday's high in the process. Here is a daily chart of April Crude Oil which is current to the time I am writing this article:

    (click to enlarge)

    I just saw a headline where Dennis Gartman is calling for $10 crude oil. Well, he might eventually be right but I seriously doubt it. In the short term however, we are now looking like we are trying to form a short term bottom and could easily rally back to the $48 to $50 area if not higher. Don't listen to the hype, just follow the chart action. Watch the news on CNBC but have the volume muted. Follow the price action as the price action is the real "tell". What I see from the charts, makes me quite confident in repeating that $40 to $42 is strong support in April Crude Oil, and as we move forward trading May Crude Oil etc., we should continue to hold support there. If the $40 price level is broken, do not bet on a move under $35 and we may not take out $37 on the low end. Regarding the bearish fundamentals, the "market" already knows all about that and is pricing in all that bad news. We won't run out of storage room and at some point the supply/demand imbalance will even out on its own, thanks to these low prices. If you wait until the fundamental picture improves to buy, you will have missed the bottom and will be buying at much higher prices with risk of getting caught in a pullback. I repeat my suggestion that at $45 and lower in April Crude Oil, it is a great spot to be buying Crude Oil as well as the energy ETFs. Now we can turn to my favorite: gold!

    The Fed Induced Gold Rally Could Take Gold To $1200 to $1220

    (click to enlarge)

    The above April Gold Chart includes the current price action up to the time I am writing this article. After we got the pop on Wednesday when the Fed appeared quite dovish and pushed back expectations of a rate hike from June to September (or sometime in 2016 LOL), gold surged higher. We were saved from having to drop down into the abyss at $1100 or a bit lower......for now anyway. When we made that surge to $1175.10 on Wednesday, I posted on Stocktalk that we should correct down to the $1155 to $1160 level where one could get long. Well, we dipped on Thursday to $1158.60, and I was able to buy several contracts from the $1163s down to the $1159s. I correctly predicted that Thursday would be a consolidation day and that Friday would be a surge higher. Bingo! Higher prices on Friday. A key resistance level previously noted, was $1180 to $1184 in April Crude Oil. Today's high so far is $1183.70 and we are holding now right above $1180. What was a ceiling ($1180) later becomes the floor, as you move up the price elevator towards $1200 to $1220. Yes, we could easily rally that high before rolling over to retest the lows. I am continuing to play the long side as we test the resistance levels of $1184, $1190 to $1194, $1200 and eventually $1220. You can follow me during the day as I make comments on a Stocktalk thread.

    Although we are now above $1180 in April Gold and that should now be support, we are still vulnerable for retracements to $1175 and even down to $1170. However, for now the US Dollar had priced in an imminent interest rate increase. Now that the date has apparently been pushed back, thanks to the weakness in the economy and lowering of inflation expectations, the US Dollar needs to adjust to a lower level, allowing for commodities to correct higher, moving off their lows. I am still calling for a commodity bottom in April, but am enjoying the current kickback to the upside. I love it when the bears have to scramble to cover their shorts!

    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.

    Mar 20 11:51 AM | Link | 9 Comments
  • Exciting Trading Prospects Upcoming In Natural Gas, Crude Oil And Gold

    During my research today, I have come across several articles with very timely information that I would like to share. I will begin by covering natural gas, and then move on to crude oil and gold.

    March 19th Could Be Short Term Top In Natural Gas

    Looking at the above chart, one will notice how natural gas tried to bottom in January around $2.80 support. Many of those trying to pick a bottom were surely stopped out when that support gave way in late January, causing a bottom in the low $2.60s. However, natural gas regained its footing at lower prices and thanks to some cold weather hitting, was able to briefly trade to the $3.00+ level. It is now trading sideways between $2.66 and $2.88. This action gives me more hope that we probably won't fall that much lower in 2015 before we bottom and begin the long trek to higher prices.

    Back on February 28th, I wrote an article found here, where I identified the current trading pattern to what occurred three years ago. Just as natural gas bottomed in April 2012, I was now predicting a similar major bottom to occur in April 2015. Well, I have now located an article from Main Street Trading found here, where the author also mentions the three year cycle of natural gas, and also is looking for a major low to occur in April 2015. Main Street Trading shows how the current action is similar to what occurred in 2012 and in 2009. But Main Street Trading also adds a very important point that March 19th was the last major high point those two previous times, before falling to the April low. Thus, this Thursday, March 19, 2015, on the day of the weekly natural gas inventory report, we could hit a major high in natural gas just prior to or following the report that day. We should then start a 4-week selloff into the Spring low. Those who are invested in the triple leveraged bullish natural gas ETN (NYSEARCA:UGAZ) may want to utilize any strength we see in the market prior to and during Thursday to buy some leveraged bearish natural Gas ETN (NYSEARCA:DGAZ) to offer protection as we anticipate a 4 week selloff to follow, taking us to the seasonal April 2015 low.

    Crude Oil Could Also Be About Thirty Days From Its Low

    In my February 28th article, I also predicted a low in Crude Oil to come in April 2015. Recent price action makes me more confident in that prediction coming to pass. For one, Jim Cramer pointed out this week that the junk bond market which is loaded up with oil company paper, is rallying rather than selling off, click here for video. The oil companies have been able to look to Wall Street to borrow and stay afloat. Drilling costs have dropped, and I agree with Cramer that the oil stocks probably have already bottomed. Could the futures market be that far away? The last couple days dozens are coming out of the woodwork predicting much lower prices down to $30 or $20. This is hogwash. It is unlikely we trade much under $40 and the worst case scenario might be $35, but only for a day or two. On Friday the US mentioned they will be adding to their oil reserves. China has already begun buying and should increase purchases on lower prices. India has no emergency oil reserves but is expected to begin buying shortly. Here is a daily chart of May Crude Oil futures:

    On Friday on Stocktalk, I mentioned that one could begin buying crude oil and energy ETFs and ETNs but be a scale in buyer. I am recommending buying 10% now, and another 10% down on every drop of $1 in crude oil. If one had $50,000 to invest, buying $5,000 of an ETF or ETN, every time crude oil drops another dollar, the number of your shares you can buy will increase as the price of the ETF or ETN goes lower. Thus instead of needing to rally back half way to break even, one may only need to rally back 35 to 40% off the lows to reach a break even point. Those less anxious to trade can wait to buy until we reach $40 to $42 in crude oil to buy. And then buy 1/3 to 1/2 of your position, and add more if we should trade into the $30s.

    Tom Aspray wrote an article on crude oil and gold on Friday, click here. I agree with Tom that crude oil could hit $40 or a tad lower, but that the energy stocks could have already hit their lows. Tom Aspray is looking for more weakness in gold, and I will cover that market now.

    Still Like Buying The Dips In Gold As We Drop Lower & Lower

    It is amazing that I have been able to successfully trade gold from the long side, soon after it topped out just above $1300 recently, all the way down to the $1140s and $1150s where we now sit. I never "hung" any contracts along the way. Well, if I have not hung any contracts to this point, it is doubtful I should get in too much trouble buying into major support and even a break of that support. The reason I have remained bullish gold, can be found in an article by Jason Hamlin, located here. We both see the current weakness in gold and the miners as an excellent long-term buying opportunity.

    I expect gold will bounce on every new low that it makes in the next few weeks, just as it has done so far in the current downward correction. I will be buying every dip, especially when new lows are struck. $1130 should be a great spot to go long, and a break of support should open the door to $1100, which should be a fabulous spot to get long gold. Although there are many predicting an ultimate bottom in gold at $1000 or as low as $850, I feel that the most likely bottom will occur in the $1065 area and we may not trade much under $1095. I am buying gold using micro 10 ounce futures contracts. Every $1 drop in gold only translates to $10 per contract. I can buy every $2 drop lower, and relish getting more contracts bought on further weakness as I average down. Should we finally trade down to the $1065 to $1095 area, I will probably switch over to the full 100 ounce contracts because I want to own several under $1100. I do not see the price of gold being sustainable under $1100 long-term, due to the price of production of the miners.

    Finally, Neils Christensen of Kitco News, had a good article showing what we can expect next week, click here. On Wednesday we get the "dreaded" FOMC policy statement that could be the catalyst to lower prices in gold. If we should fall into the Wednesday announcement then I will be lightly buying into the report. You can bet that if gold does plummet post report, I will be aggressively buying into that dip, especially if the $1130 support level gives away. Professionals will get rich running the stops under $1130, and I expect to profit as well. Nothing could be more bullish for gold, than to make a marginal new low, with major new shorts entering the market under $1130 and longs giving up at the bottom. I can hardly contain myself in anticipation of the final dip lower as it should surely be the long anticipated bottom we have been looking for!

    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.

    Mar 14 4:08 PM | Link | 4 Comments
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