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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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  • Natural Gas Did Key Reversal Down Today, Now Buy DGAZ Over UGAZ

    The above daily chart of September Natural Gas shows a market that rallied to just above $2.950 resistance on a bullish inventory number today, but then closing down hard, engulfing the prices where natural gas traded the previous two days. Above $2.90, I was recommending buying DGAZ and expected a bearish reaction after the report. I stated in our WeChat room that natural gas would likely close down today despite the bullish report, as we are still building large inventory. The funds are bearish and they use every opportunity to sell into strength. Someday this may change but not now. If you look at the action of May 19, 2015 on the above chart, you will see a similar key reversal down day when we topped at $3.163. Volume that day was large. Today's volume was over twice the normal volume in September Natural Gas futures, which also confirms the strength of this move.

    Just as we got early day rallies the following two days following the May 19th key reversal day, do not be surprised if they buy natural gas up on Friday, July 27, 2015, at least initially. One could expect to get within a few ticks of $2.90 on Friday, which would translate to a DGAZ price of less than $5.20. Here is a daily chart of the triple bearish DGAZ chart.

    (click to enlarge)

    If you buy DGAZ at $5.20 or a bit lower, you can do like "Anti" does and add every 6% lower. That will work fine for now, especially since we have formidable resistance in natural gas at $3 and $3.15. If however, natural gas starts showing unusual strength and begins charging strongly above $3, instead of continuing to buy at lower and lower DGAZ prices, a more prudent approach might be to balance your account with the triple leveraged UGAZ.

    WARNING!!!

    Note: Whenever I mention a triple leveraged ETF or ETN, I will try to always give a caveat! Since a 33% drop in the underlying commodity can cause a 99% loss in a "triple" and blow out your account, one needs to divide their money into 3 trauches. You can continue to buy a "triple" until 1/3 of your money is invested. At that point you are only allowed to buy the opposite "triple". Then when the 2nd third is fully invested, you can add to which ever side is "winning". This way it would be an extreme challenge if you tried to blow out your account. When one accumulates more and more on a "triple" without ever taking any "protection" by purchasing the opposite "triple", it is often an extreme challenge not to blow out your account, even when you are trying desperately to hold on!

    Again these "triples" like UGAZ/DGAZ, NUGT/DUST, UWTI, DWTI etc., are made for daytrading or swing trading and not advised to be held for longer than a week. I have a Friday rule when trading "triples". For any triple that is in a loss greater than a few cents, I will sell out of half my position to raise cash to buy back lower, or better yet, buy the opposite triple on that same Friday to "freeze the loss" and see how I want to play once we start trading the next week.

    Summary

    It looks like it is time to stop buying UGAZ unless you want to buy extreme lows. But with today's big selloff, you might be able to scalp from the long side using UGAZ until we approach the $2.90 level, but above $2.90 in September Natural Gas switch to DGAZ. If we should rally above $3 and especially $3.15, that is time to play UGAZ again. On short-term strength, it is DGAZ time!

    To follow along as we buy GLD, GDX, IAG, KGC or other mining stocks or Gold futures, or trade crude oil (UWTI and DWTI), natural gas (UGAZ and DGAZ) and other commodities, join us in our private Short Bull Trading Room on WeChat. Just download the free app on your phone or tablet, and then add "bobed1". You can then send me a message so I can invite you into the room. Still plenty of room.

    You can also subscribe to my free weekly newsletter. Send an email to shortbull2020@yahoo.com if interested in subscribing. Again, it is free!

    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: DGAZ, UGAZ
    Jul 23 9:03 PM | Link | Comment!
  • Gold Miners Could Bottom Tuesday July 21, 2015 With Retest Friday July 24, 2015

    We are presently experiencing a typical capitulation washout bottom in the gold mining stocks. The gold mining stocks were washed out last fall and I was hopeful we had seen the low then, but I was wrong. The miners have never been this cheap ever in history. GDX is now trading below the $15.83 low hit in October 2008, and below $15.24 if you add in the dividends paid out to date. However, relief is within sight. Please continue reading.

    Tuesday And Friday Should Be Days To Catch A Ridiculously Cheap Price In GDX And The Miners

    (click to enlarge)

    The above chart is a 1-year chart of the large gold miners ETF (NYSEARCA:GDX). You will notice that in October 2014, GDX bottomed around $20 and went sideways for a month. This $20 was a double bottom from where GDX bottomed in December 2013. Notice that when the support was broken, GDX fell for three trading days, consolidated 2 days and then made a marginal new low of $16.34 which was the lowest price seen since October 2008, during the financial crisis low. GDX finally traded to the low $16s late last week, but had a real smackdown red candle last Friday, July 17, 2015. Today, thanks to the flashcrash of Gold, Palladium, Silver and Platinum overnight, that caused gold to break below $1100, additional indiscriminate selling went on in GDX and it closed at $13.78. We have had two hard selloff days which has devastated the bulls. If we follow the typical pattern for the miners we should expect a weak opening in GDX on Tuesday, the 3rd smackdown day, and either a close near the low opening or an intraday rally. Then on Wednesday we should get at least a one day relief rally with Thursday falling back lower but still trading above Tuesday's low. Friday, July 24, 2015 should be the retest of the bottom which could be above Tuesday's low or slightly below.

    IAG Is Dirt Cheap

    (click to enlarge)

    Today IamGold (NYSE:IAG) traded below its November 2014 all-time low of $1.42. IAG closed today at $1.35. When IAG bottomed at $1.42, it rallied back up to $3.39 in 11 weeks. I now anticipate IAG will bottom between $1 and $1.20 and expect a substantial short-covering rally off the lows like we saw last fall. A snapback to $2 should be easily accomplished with a move to $2.50 to $3 possible over time.

    In 2013, in 2008 and in other years where gold and the miners have been slaughtered like at present, large short-covering rallies occur in gold where as much as 75 to 80% of the selloff is recovered in a matter of weeks. I don't know if we will get a $100 or $200 rally in gold when gold finally bottoms, hopefully this week, but based on past experience, such a rally can be expected. We will soon know if we are close to a bottom, or if the flash-crash is going to require a further move down and consolidation before we can bottom.

    In my Saturday newsletter, I mentioned that this week would allow for trading in the triple leveraged NUGT and JNUG as we bottom. However, after seeing the flash-crash, I am advising to not trade those for a bit longer, until a bottom is confirmed. There is always the chance for the negative momentum to get out of hand and for gold and the miners to overshoot the bottom, to valuations that are even beyond absurd.

    To follow along as we buy GLD, GDX, IAG, KGC or other mining stocks or Gold futures, or trade crude oil (UWTI and DWTI), natural gas (UGAZ and DGAZ) and other commodities, join us in our private Short Bull Trading Room on WeChat. Just download the free app on your phone or tablet, and then add "bobed1". You can then send me a message so I can invite you into the room. Still plenty of room.

    You can also subscribe to my free weekly newsletter. Send an email to shortbull2020@yahoo.com if interested in subscribing. Again, it is free!

    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.

    Jul 20 7:13 PM | Link | Comment!
  • Gold Should Bottom The Week Of July 20, 2015, Somewhere Between $1125 And $1084 In August Gold

    What has been clobbering the gold and silver markets lately, has been caused by massive shorting by large speculators and funds. When we bottom, these short positions have to be covered as they cash in their profits by buying the contracts back. Adding to the bottom fishers, buying by short sellers should cause a massive short-covering rally. To understand how this will work and for his timely insight, please check out Adam Hamilton's article, by clicking here.

    Now, before we can start that short-covering rally we must first bottom. Today we made a low price in gold futures, not seen since April 2010, which is over 5 years ago. However, a new bottom is near! And I think I have a good idea when that new bottom will appear. I know most are anxious to see a sharp short-covering rally. I predict the bottom is anywhere from Friday's low in August Gold futures at $1129.60, to as low as $1084.00. And we should hit that low this coming week. Yes, within the next 5 trading days.

    To see how I came up with this prediction, we need to take a look at the weekly chart of August Gold futures as follows:

    Counting from the left, on the third bar of the above weekly continuation chart of Gold we see an important bottom struck the last week of June 2013, at $1183.20. That bottom was powerful enough to cause a short-covering rally in 9 weeks to $1428.00, a gain of $244.80. But in January 2014, we again tested the low, stopping at $1182.00. After a rally to nearly $1400, we would again test that low in October 2014, stopping at $1182.80. These three lows formed what is called a triple bottom formation. Unfortunately the last bottom would fail just three weeks later, when gold broke under $1182, closing that Friday at $1171.10, and falling to $1133.00 the following week. Look at the above chart to see the dark black candle. It was indeed fortunate we bottomed the next week and the $1133.00 level sustained two retests without making a new low.

    To review, breaking $1182 support, caused a $49 further selloff to create the $1133.00 bottom, and a rally back to form a bullish candle the following week the support was broken. However, on Friday, July 17, 2015, on the third test of that low, gold broke down to a new low of $1129.60, closing under the $1133.00 support level on the week. Could we now fall a similar $49 next week like we did when the $1182 support level was broken? Sure. And that would cause a low of $1084 next week, and a big short-covering rally to the high $1120s by Friday to form a bullish hammer candle on the weekly chart. We may not fall as low as $1084, but that is what I feel is the worst case scenario. We could have bottomed on Friday in fact, but that is doubtful since we hardly bounced late Friday. Be advised there are price targets of $1125, $1113, $1100, $1095 and of course my $1084. One of these levels should hold and start a short-covering rally. Last time we rallied from $1133 to just under $1203 in less than 3 weeks, a move of almost $70 off the bottom. I expect no less of a rally when we bottom this time, and possibly more since we have record short interest. I look forward to trading this coming week.

    To follow along as we buy GLD, mining stocks and Gold futures, or trade crude oil (UWTI and DWTI), natural gas (UGAZ and DGAZ) and other commodities, join us in our private Short Bull Trading Room on WeChat. Just download the free app on your phone or tablet, and then add "bobed1". You can then send me a message so I can invite you into the room. Still plenty of room.

    You can also subscribe to my free weekly newsletter. Send an email to shortbull2020@yahoo.com if interested in subscribing. Again, it is free!

    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.

    Jul 18 1:52 AM | Link | Comment!
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