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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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  • Using Cycles To Predict The Near-Term Bottom In Gold & Crude Oil

    Gold

    For an introduction on cycles, please click here, to read an article written by Gary Savage, that I found at kitco.com. The article was written following trading last Wednesday, November 28th. The author was looking for a "no vote" in Switzerland, knocking February Gold down to as low as $1000 to $1050 over the first couple weeks of December. Well, although we got a "no vote" as expected, and sold off to as low as $1141.70 Sunday night, we then rallied all the way back above $1200 to $1221 Monday, closing at $1218.10. Jim Wyckoff does a great job explaining what caused today's turnaround, click here. After today's massive key reversal, it greatly reduces the chances that $1130 gold support is broken during the month of December. Just take a look at the daily chart of the SPDR Gold Trust Shares (NYSEARCA:GLD):

    (click to enlarge)

    Over the weekend, Avi Gilburt wrote an article, click here, where he stated, "What I am looking for is a minor consolidation in the GLD below the 114 GLD, setting up another smaller decline towards the 111 region. From there, we will be looking for a corrective rally back up towards the 114 region, which would then set up the final decline phase into December, taking the GLD down to at least the 105 region.

    However, should the market move through the 114 region strongly, and in what we Elliotticians call an "impulsive pattern," we can still delay these final lows into early 2015, as it would mean another rally phase would take hold, and take the GLD back up to the 118-120 region, which would then set up the final decline. This scenario would clearly have to be proven to me, as my primary expectation is that we will set up for lower lows this month".

    It looks like closing today at $116.58, one should target $118 to $120 before rolling over, according to Avi, and if we are going to get that final capitulation low, it will likely not happen until early 2015. That sounds reasonable.

    The number one reason that is given for the weakness seen in gold the last several months, is the strength of the US Dollar. As the dollar gains strength, gold tends to fall. Since the Euro makes up 57.6% of the weight of the US Dollar, the dollar can not rise without the Euro falling. Likewise, for gold bulls to see the US Dollar to fall, they need to see the Euro rally. Therefore we need to look at the monthly chart of the Euro to see if the Euro can bottom.

    This monthly chart of the Euro goes back 9 years. In that time frame you can quickly notice how the Euro topped above 1.6000 in early 2008. However, in late 2008, the Euro sold off and traded below 1.2500 in October 2008 and again in November 2008. The time the Euro spent below 1.2500 was about 4 weeks. Then again in May 2010, the Euro fell below 1.2500 and even fell below 1.2000 briefly. It was not until July 2010, about 6 weeks later that the Euro traded and stayed above 1.2500. Well, again in 2012, the Euro traded one month below 1.2500, back above the next month. Then down another month and back above 1.2500 the next month. Twice the Euro stayed about 4 weeks trading below 1.2500. Well, it is 2014 and in November, the Euro traded and closed below 1.2500 yet again. Will the Euro find support and move out of the bottom during the month of December 2014? I believe it will. If I am wrong though and the Euro eventually falls below 1.2000 like it did in 2012, then I would expect that by the 4th month, March 2015, the Euro will be back above 1.2500 and working back towards 1.4000. Whether the Euro bottoms in December 2014 or it takes until March 2015, the days of the strong dollar should be numbered. When the Euro bottoms, gold should bottom too.

    Crude Oil

    The above article by Gary Savage, also covered crude oil. During the 2008 crude oil crash from the $147s to the $32s, it was the 200 month moving average that stopped the fall. If the current oil crash also stops at the 200 month moving average, it would also stop at $60 or a bit less. January Crude Oil bottomed overnight at $63.72 and reversed higher to close at $69.00. Right now, $60 is looking like a good level that January Crude Oil could bottom at. If it should continue lower, Gary Savage shows a trendline that hits around $46 at present. If $60 gives way, $50 down to $46 should hopefully be the absolute bottom. I will now show a monthly chart of crude oil going back several years:

    Back in 2008, crude oil dropped from the $147.27 high to the $32.40 low in only 6 months. Now look all the way to the right, and you will notice that through November 2014, we have been dropping precipitously for 5 months. We have already fallen into the $63 area in just one day of trading in December. During November, crude oil fell about $15, so another $15 or $16 lower in December 2014, would make crude oil bottom around $50. Notice that in 2008, there was a dip to the lows during November & December in 2008, and again in January 2009, before crude oil rallied up for good. This is good to remember since crude oil bounced nearly $6 today, it is quite doubtful that we have seen the ultimate low and that low will have to be tested over and over before crude oil bounces up for good. Also notice that back in January 2007, crude oil bottomed at $50. After falling to the $32s in 2008, I would expect crude oil to again bottom somewhere between $50 and $60 in December 2014 or January 2015.

    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.

    Dec 01 11:07 PM | Link | 7 Comments
  • Gold & Gold Mining Stock Review For Week Of November 24-28, 2014

    Gold & Miners Finally Showing Some Life

    The Junior Miners (NYSEARCA:GDXJ) and the triple leveraged (NYSEARCA:JNUG) have recently been the weakest gold mining sector. However, that changed about 2 1/2 weeks ago. If you have been following my recent instablog articles, you will notice how I have been bullish the gold miners for the past couple weeks, and JNUG in particular from the $3 area. JNUG is now approaching $6, a double off the bottom. You might want to check out this bullish GDXJ article, click here, by Jeb Handwerger from goldstocktrades.com. Another striking development is Bernard Stegmueller Jr, declaring the bears have gone into hibernation, click here.

    Although the gold and silver market are looking much for positive for the remainder of 2014 and beyond, we may still not be totally out of the woods. Gold bulls need chart action on Thanksgiving week to confirm a bottom. If gold tops out on Monday and fails to take out that high for the remainder of the week, then a greater correction will likely be in store.

    This past week in my daily Stocktalk comments, I have been indicating that I remained bullish gold and the miners until at least Monday, November 24, 2014. Monday could be a very minor cycle top, or a major cycle top, depending on what occurs the remainder of the week. With Monday being options expiration in metals futures contracts, since we have rallied into the expiration, one would expect to see at least a couple day selloff following expiration. Again, for several days, my Stocktalk comments have indicated a possible high in gold on Monday, November 24, 2014.

    After a strong Monday high, a small consolidation selloff on Tuesday and Wednesday of this coming week is anticipated. With the markets closed on Thursday for Thanksgiving, the bulls will need to see a strong Friday close, hopefully taking out the high of Monday. Barring that, the first week of December could show some further slight slippage which could accelerate to the downside. Please take a look at the daily chart of December Gold:

    Back on October 6, 2014, December Gold futures bottomed at $1183.30 and reversed strongly higher that very day. Counting that reversal day as day number "1", there was a 12 day rally to $1255.60, with minor tops on days 4 and 8, and final top on day 12. Well, the recent low of $1130.40 scored on November 11th, was also a strong reversal up day, off the lows. Counting that as day number "1", it turns out that Monday, November 24, 2014 is day number "12" of the current rally. Strong minor tops were on days 6 and 8, and I anticipate Monday being at least a minor high as well, again as Monday is day 12 of the move higher. Back in late October, after topping at $1255.60, gold sold off for a couple days and then went sideways to slightly lower for 4 more days before falling hard. If Monday, November 24th is a high, followed by two down days on Tuesday and Wednesday, I would anticipate Friday and the first few days in December to be sideways to slightly lower, before a hard selloff if we are going to retest recent lows. On the other hand, if gold shows some strength beginning Friday, December 28th, after Thanksgiving, then gold could continue higher towards the $1250 area. We should not have to wait long to see if gold forms a short-term top on Monday, or continues to rally for a few more weeks, after some minor consolidation.

    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.

    Nov 24 12:58 AM | Link | 5 Comments
  • Petrobras (PBR), Cliffs Natural Resources (CLF), & Freepport-McMorRan (FCX) Are All Bottoming

    PBR Is A Falling Knife Buy Again!

    (click to enlarge)

    Back on March 7, 2014, I published a Petrobras article, click here, where I predicted that PBR would bottom at $10.17. Turns out that I caught the bottom by about 3 cents if you look at regular market hour price action low of $10.20, or just 1 cent, if you consider the premarket low of $10.18. After that bottom, the stock would hit a September high of $20.94, which is quite a remarkable recovery.

    Well, the stock has again been clobbered due to fraud charges, illegal political influences, etc. Earnings have been delayed with no clue as to when they might be released. Yet, this past week, PBR has again bottomed at $8.80. The $8.80 bottom is 13.7% lower than the March 2014 bottom of $10.20, which is not quite to the 15.5% target used in my previous article. However it is close enough and it would appear that the bottom is now in for now. Any dips below $10 especially should be bought. I will end this section with a daily chart of PBR as follows:

    (click to enlarge)

    It would appear that $12 should now be resistance in PBR and anything under $10 a buy. I favor scalping from the long side during the day, but would not hold overnight until after earnings are announced. When the full fraud damage is revealed and earnings are restated etc., PBR should again take a temporary dive which may be above or below the recent $8.80 low. However, that dip should be quick with a fast recovery, and a major long-term buy, just like all previous washout dips have been.

    CLF bounced again off $8 this week!

    (click to enlarge)

    CLF bottomed in early October at $6.90. From that low, CLF rallied just under $10 and then stayed above $8 before eventually overtaking $11 resistance. On some possible iron ore mine closure news this past week, CLF again retested the $8 support level, but held in at $7.91. It has now rallied hard the last 2 days. On Friday when I saw CLF was in the $9.70s in the premarket, I suggested daytrading the stock by buying $9.50 or lower and then selling out at $10.00. We can see from the following intraday chart how that worked out:

    (click to enlarge)

    You can see an opening day dip in CLF to $9.35 so buying under $9.50 was very easily accomplished. Within 30 minutes, CLF rallied to $9.73, offering an easy 25 to 30 cent scalp. Then CLF dropped back to a daily low of $9.29. Buying in the $9.30s, one could have held for a midday rally to $9.91, selling in the $9.80s, for a 50 cent scalp. Just prior to the close the high of the day of $9.99 was hit, just missing my $10 target by a penny.

    Friday, CLF gapped up nicely leaving a gap between $8.75 (Thursday's close) and $9.29 (Friday's low). I expect that dips into the gap area at $9 and lower should be a buy, as CLF tries to eventually work up to test resistance at $11.

    FCX Is A Buy Under $30, And Major Buy Under $29!

    (click to enlarge)

    The above 3 year weekly chart of Freeport-McMoRan, Inc. (NYSE:FCX) a copper/gold and now oil exploration stock, shows how one should sell in the high $30s, but buy in the high $20s. A couple weeks ago, FCX bottomed at $27.07, and has bounced nicely off the lows. I am now recommending buying all dips under $30, with the goal of selling again in the high $30s just 4 to 6 months out. Fundamentals are starting to stabilize if not improve, in copper and gold. Also crude oil should either find a near-term bottom or consolidate by moving sideways or slowly dipping lower. Don't expect to see FCX to remain under $30 for long. I will end this section with a daily FCX chart:

    (click to enlarge)

    Friday, November 21st chart action looks quite similar to the October 21st action where FCX gapped up but closed lower than the opening price. A month ago, FCX rolled over and would make new lows. FCX will likely roll over again in the next few days, but I anticipate the bottom holding this time and would buy this stock in a big way at $28.50 and lower, looking for a $10 rally over the next 4-6 months.

    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: FCX, CLF, PBR
    Nov 23 7:14 PM | Link | 5 Comments
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