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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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  • Robert Edwards' Trading Commentary For Wednesday 03/19/14

    Switched out of DUST above $19 and into NUGT

    (click to enlarge)

    I took profits in DUST today above $19 and it looks like it was a good move so far, as DUST formed a bearish hanging man candlestick formation today. DUST may not fall immediately but should go ahead and roll over a bit before bottoming. In last night's article, click here, I explained how I expected to take profits and move into NUGT today and I did that very thing. Here is a daily chart of the 3X leveraged bullish mining ETF (NUGT):

    (click to enlarge)

    NUGT formed a bullish gravestone doji today (for an explanation click here). We are moving back into a solid support zone from $47 to $50 in NUGT and I expect for this support to hold on the first retest after getting turned back from just under $60. A trader should have only been 1/3 invested in DUST and having taken profits in DUST above $19, one should now be 1/3 invested in NUGT, with scale buying of 50 to 100 shares every 50 cents lower a great way to average into the trade. By averaging into the trade one can take partial profits on small rallies to make money even if we end up moving sideways in a tight range for awhile. If $47 support is broken on a close, I would then consider buying DUST using the 2nd 1/3 of funds. Then one still has 1/3 of their funds to add to the winning side to get your money back. This teeter totter approach works most days and especially is advisable when the market moves against your trade. Rather than keep adding to a loser, it is much preferred adding to the opposite side to balance out the trade and one will be assured of making money on one side or the other and not making their losses worse. The secret is to always place a leveraged ETF trade against a support. Right now DUST is not trading at a support area but NUGT is, so I moved into NUGT. If DUST gets cheap again, and retests the bottom, then I will be more anxious to buy back into DUST. By buying at support, one knows when to add the opposite side -- add when the support is broken. Right now, I want to be biased towards NUGT which means I prefer buying dips in NUGT rather than in DUST, although DUST can still be successfully bought on dips. NUGT is just the safer trade right now and the odds are favoring NUGT since it is nearing an established support area. When NUGT bounces, I expect to see a quick move to $52.50 to $53 where I plan to take some profits and may add some DUST there to play for a short-term correction the other way. This is called the Lefty teeter-totter approach and so far I have not found anything that beats it. It was suggested by SA contributor Lefty6x6.

    CLF Continued Bottoming Action Today

    Back on 3/11/14, I called a bottom in Cliffs Natural Resources (CLF) at $17.40, click here. Not only has it bottomed, but it have now moved up nicely above $19 and I expect to see a rally into the $20 to $22 area shortly. Here is a daily chart of CLF:

    (click to enlarge)

    PBR Bottomed Right On Schedule Today

    (click to enlarge)

    PBR did an engulfing pattern and should switch from a short to a buy beginning Wednesday 3/19/14, if we get follow thru to the upside, see Americanbulls.com here. I had predicted a bottom in PBR at $10.17, see my article dated 1/25/14 here. It looks like I missed the bottom by 3 cents as we hit a low so far of $10.20, but that is the day session prices. Monday's aftermarket price low was $10.18 and I bought several shares at $10.20. I am still long having added in today's aftermarket. I will unload some shares on opening strength on Wednesday but want to keep a position on until we trade back above $11 and hopefully move on to $12 and higher eventually. Yesterday I called for a Tuesday up day because we had been down 3 days in a row. We not only got an up day today, but an impressive engulfing candle that needs to be further confirmed by another strong close on Wednesday. Lately PBR has had trouble putting two white candles together but it is time for PBR to make a change and begin moving higher for 2, 3, or 4 days in a row.

    Disclaimer:

    The thoughts and opinions in this article, along with all stock talk 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.

    Disclosure: I am long NUGT.

    Additional disclosure: Also long CLF and PBR. I am short 18 strike April CLF puts.

    Tags: NUGT, DUST, PBR, CLF
    Mar 18 11:01 PM | Link | 4 Comments
  • Robert Edwards: Three Timely Triple ETF Trades For Tuesday 03/18/14

    SDOW should be a buy under $30, for a move to $32, then switch to UDOW

    (click to enlarge)

    If you look at the above daily chart of the 3X Bearish Dow Jones Industrial Average ETF (SDOW), one will notice that last week we rallied five straight days, as the Dow Jones Industrial Average fell all five days. A similar 5 day decline in the DJIA occurred from 11/29/13 thru 12/05/13, with SDOW moving from $32 to close at $34.16. Then SDOW fell for two days and was a buy at under $33 before rallying to a high of $34.77, three days later.

    Now comparing that action to the present, all last week, SDOW rallied for the same five days before falling today, 03/17/14. The rally was from a low of $29 to a high of $31.40. With today's selloff, SDOW closed at $30.24 and I am looking to buy into the weakness I expect to see between $29.60 to $30.00 on Tuesday, 03/18/14. We have fallen one day so far, after a 5 day rally in the SDOW and I am looking for another drop in SDOW to buy into. Then I expect the DJIA will fall the rest of the week and make a marginal new low, causing SDOW to rally and make a high towards $32 by Friday of this week. If this occurs as planned, then I will be quite anxious to be switching into UDOW on Friday of this week or Monday of next week.

    DUST favored to $18.75 then switch to NUGT

    (click to enlarge)

    The 3X leveraged bearish gold mining ETF (DUST) formed a bullish inverse hammer candle formation on Friday, 03/14/14, and today the formation was confirmed with a strong rally back above $18. The underlying gold mining ETF (GDX) stopped dead when it hit major resistance on last Friday's opening. I had been predicting $28 to be major resistance for GDX for some time. However, the bullish momentum in GDX that caused it to rally to $28 will not allow DUST to probably rally much higher than $18.75 to $19.00 before DUST sells off again. The 9 day moving average red line on the above chart, is presently at $18.80 and could provide short-term resistance for DUST. That would translate to a temporary bottom of $26.50 to $26.60 in GDX on Tuesday, 03/18/14. I plan to be taking profits on my DUST shares on Tuesday in the upper $18s and will then be looking for a short-term scalp in NUGT before moving back into DUST by the end of this week or sooner. Below is a chart of the 3X leveraged bullish gold mining ETF (NUGT):

    (click to enlarge)

    As NUGT falls back into the support zone of $47.00 to $50, I want to do a scale trade buy into NUGT. The support area of $47 to $50 in NUGT is so well established, traders should be buying into that zone once we return there. Once NUGT hits bottom in the next day or two, in that $47 to $50 area, it should bounce back to $52.50 to $53 quite easily, making a nice couple day swing trade. I might then look to switch back into DUST but more on that later.

    DGAZ favored over UGAZ

    (click to enlarge)

    I am looking for a further drop in DGAZ towards the $3.25 area possibly to accumulate shares, to sell in the $3.80 to $4.00 area. To see why I believe we could fall a bit lower in DGAZ and then we should rally, one needs to look at the May Henry Hub Natural Gas Futures Chart as follows:

    You can see from the above chart that we gapped up today and look to be heading towards major resistance between $4.60 to $4.67. That is an increase of 3 to 3.5% from Monday's close, which translates to about a 10% move lower on DGAZ. With a close today in DGAZ of $3.49, it could fall to the $3.15 to $3.25 area to correspond with where natural gas is expected to trade in the next couple days. If natural gas is rejected when it hits the significant overhead resistance are shown on the chart, I would expect it would then drop down towards $4.20, a drop of about 7% in natural gas, or a pop of about 21% off the $3.20 low of DGAZ. That would translate into a rally target of $3.80 to $4.00 in DGAZ.

    Conclusion:

    In additional to these three triple leveraged ETF trades, I will also be watching CLF and PBR, two stocks that I have written about extensively recently. After forming a bullish homing pigeon formation on Friday, today Cliffs Natural Resources (CLF) was a buy at $18.65 at Americanbulls.com, click here.

    Petrobras (PBR) is falling down to my $10.17 buy target with today's close at $10.27. I was able to pick up additional shares in the after market this evening at $10.20. PBR has fallen three days in a row and for the last several months, after falling three days in a row, the 4th day is an up day, so I loaded up today in anticipation of Tuesday, 03/18/14, being an up day.

    Disclaimer:

    The thoughts and opinions in this article, along with all stock talk 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.

    Disclosure: I am long DUST.

    Additional disclosure: Also long DGAZ, CLF & PBR.

    Tags: DUST, DGAZ, SDOW, CLF, PBR
    Mar 17 10:18 PM | Link | 3 Comments
  • China Is Key To Gold Direction And Not Ukraine

    Question: Hey Sherlock, where can I find a clue to tell me where the future price of gold is headed? Answer: Holmes, as in Frank Holmes. Click here to hear the Bloomberg Radio audio tape when Frank Holmes was interviewed recently by Kathleen Hays on The Hays Advantage radio program. Listen to the audio file carefully as it is the best explanation of what affects the price of gold, that I can remember. You will need to first listen to the audio file and then continue reading. Frank's explanation of "the love trade" and "the fear trade" are excellent.

    In my last article I mentioned how tariffs in India should limit physical gold purchasing along with weakness in China. I took China weakness as a negative for gold as the Chinese should be less able to purchase gold. I was looking at Indian, Chinese, and emerging market purchases, "the love trade", as being most important. China was purchasing aggressively when gold was at $1200, but that buying has slowed down with the current gold rally to the $1380s.

    However Frank Holmes explains that the fear trade is more important now than the love trade. Real interest rates are key. When the interest paid, less inflation is positive and/or rising, gold falls. If interest paid, less inflation is negative and/or falling, then gold rallies. He explains how we have recently had negative real interest rates, that occur during times of weakness in the economy when the Fed is trying to stimulate the economy. That is what he attributes to the current rise in the gold price. On the other hand, if the Fed can taper and eventually remove the stimulus, and interest rates rise, then gold prices will fall. Dropping copper and iron ore prices are confirming the weakness of our current world economy and that probably contributed to the rise in gold this past week, more so than the Ukraine.

    If the weakness in our economy continues, Frank Holmes sees a possible 30% rally from the $1180 lows in gold to about $1550. We have already rallied $200 off the bottom, but we could still move up another $170, but not necessarily straight up. On the other hand, if the economy improves to the point that interest rates go up, then the price of gold could drop by the end of the year, and we could make new lows in gold, as predicted by Goldman Sachs and various banks and brokers.

    Regarding Ukraine, I see this as a "buy the rumor, sell the fact" situation where they bought the rumor of problems in the Ukraine, culminating in the weekend succession vote. Since they bought gold going into this weekend, unless there is a catastrophic occurrence early next week, we should fall once the votes are cast, regardless of the result. Tuesday and Wednesday is the Fed meeting and likely continuation of the taper, and that should also depress gold some. So although we have been strong this past week, we might roll over shortly for at least a shallow correction, even if we don't get the intermediate correction of a $100 drop in gold, that I have been looking for. Either way, it should be interesting to see what happens next week.

    Disclosure: I am long DUST.

    Tags: GDX, NUGT, DUST, JDST, JNUG
    Mar 15 9:44 PM | Link | 2 Comments
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