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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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  • Trading Update On Going Long Crude Oil (UWTI) And Short Natural Gas (DGAZ)

    Still Like Buying Dips In Crude Oil (NYSEARCA:UWTI)

    If you want a great article extolling the fundamental reasons crude oil is going lower, check out this article from the The Fiscal Times here. They predict the price is going lower. I predict the opposite. I base my opinion strictly on technical factors. I figure the price already reflects all known fundamentals so the charts are a better predictor of future price direction. I agree with Daniel Flynn of The Price Futures Group, in his Corn & Ethanol Report, click here. Daniel points out that crude will find its own valuation level, despite how much they want the price to drop. Here is the daily chart of July Crude Oil:

    The daily chart is only current through yesterday's close. Today we are trading well above $60, to a current high of $60.74. I recently was tracking the June Crude Oil Contract that was pricing about 75 cents lower than the July. I felt that when June Crude Oil broke under the recent low of $58.14, it would fall another $1 to $1.50 and then bounce. June Crude Oil fell to $57.09 which met my $1 minimum target and then stopped trading, moving us to the July Crude Oil Contract. I had calculated that June Crude Oil could fall to as low as the $56.40 to $56.50 area which would translate to the low $57s in July Crude Oil. However, the day June hit the $57.09 low, July Crude Oil hit $57.93, and has turned back up.

    July Crude Oil is still vulnerable to a drop back to $58 and even $57, but I don't see anything worse than that right now, on the downside. I see us trading in a range of $57 to $65 for a few weeks. I believe you will see $65 before you see $55 and you will see $70 before you see $50, and will be playing accordingly. I will be scalping in the triple leveraged bullish Crude Oil ETN over the triple leveraged bearish Crude Oil ETN (NYSEARCA:DWTI). Here is a daily chart of UWTI.

    (click to enlarge)

    The Tuesday low in UWTI was $3.21. This chart includes today's action so far, where we gapped up into the $3.60s. The gap is from $3.33 to $3.45. I would love to be able to buy UWTI again at $3.45 and every nickel lower, until we take out the recent high of $4.28. The first move off the major bottom at $1.80 to $4.28 is a rally of $2.48. If I concede that UWTI could fall to $3.00, then adding $2.48 to that figure you come up with a target price of $5.48. We could be trading there in a couple months. But if I am totally wrong, we should at worst be locked in a sideways trading range from $3 to $4.50. Anything under $3.50 in UWTI is a steal!

    I Continue To Like Buying DGAZ Under $5.00

    I wrote a trade of the week article featuring DGAZ for the week of May 18th, click here. I have to say that trade has hit a homerun. It may have been all luck, but I will take it! Just look at the daily chart of DGAZ:

    (click to enlarge)

    On Monday, May 18th, I successfully scalped from the long side for a small gain. But Tuesday was the real winner. On the drop to $4.45 that day, I got in at $4.50, and posted it in real-time on STOCKTALK. Fortunately the price stayed at or below $4.50 for an extended period of time as nat gas was topping out, making for an easy entry. I want to congratulate "shoptalk20" for taking this trade, buying at $4.50 and getting out within an hour at $5.10. That was a quick 60 cent gain (13.3%). He was smart to get out (take the money and run). However, it would be prudent to try and get in on Wednesday, May 20th, somewhere below $5. The low on Wednesday was $4.93, but you could have bought in the mid $4.80s in the premarket. Wednesday's high was $5.43, so if one had bought at $4.50 and sold at $5.40, in two days, one could have gotten a cool 20% gain! Well, late Wednesday, I recommended going the other way, buying UGAZ to catch early strength today, Thursday, May 21st. If one bought UGAZ on the close ($2.76), one could have made 7 or 8 cents getting out prior to the 10:30 a.m. EST inventory report, that was expected to be bullish. Had one stayed in with half their position through the report, they could have held out for a move to $2.99 post report. I did not hold through the report, but instead decided to buy DGAZ at a cheap price, if nat gas rallied as expected post report. I set a trap to catch some DGAZ. I wanted to get long below $5.00, hopefully around $4.75, and placed a buy order at $4.80. With natural gas spiking up post report, DGAZ hit a low of $4.77, getting me long at $4.80 and letting me scalp a quick 20 cents, selling minutes later at $5.00. I am now back in at $4.85 and will buy every nickel lower in DGAZ, looking for a move back over $5.00.

    Well, it has been a great week. I believe that this DGAZ trade suggestion was no fluke. I plan to start a service soon where I will give subscribers my trade of the week using commodity related leveraged and unleveraged ETFs and ETNs. For those trading futures, I will give the futures trades as well. I will continue to post regularly on STOCKTALK and to write articles on Seeking Alpha, however, my postings will be more reporting of what went on after the fact and not be so timely. After 2 years of writing a SA blog and posting for free, I finally decided it was time that I got paid something for the time I was devoting to my blog. I enjoy writing and helping novice traders and want to continue doing this, but my best and most timely information will be reserved for my subscribers.

    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.

    May 21 11:53 AM | Link | 8 Comments
  • Gold Closes Up For Fifth Straight Day; Technicals Quite Positive

    Check out Kira Brecht's article at kitco.com, where she provides a nice chart showing how June Gold futures is trading above the 20 day, 40 day, 100 day and 200 day moving averages, click here. She places targets at $1246.50 and $1276. According to my calculations, the first projected target is between $1250 and $1260, and should be reached in the next 2-3 days. If the rally can extend, we could keep going for another week and hit the $1280 to $1300 region.

    The only caveat is the Wednesday afternoon release of Fed minutes from the April 28-29 meeting. At least we have some time to decide what to do over the next day and a half of trading. Cutting back one's exposure to half, if trading gold or the miners, would probably be prudent, based on the weakness seen going into and out of the last couple trading days when FOMC minutes were released to the public.

    What Will The Wednesday, May 20, 2015 Release Of The April Fed Open Market Committee Meeting Minutes Do To The Price Of Gold?

    Check out the following daily chart of June Gold futures:

    (click to enlarge)

    First we can look at what happened on February 18th, when the Fed released minutes from the January 27-28, 2015, Fed Open Market Committee Meeting. I marked it on the above chart with the letter "M". June Gold dropped to $1210 on the day prior to the reading of the minutes, and then on Feb. 18th, we lost another dime, finding support at $1200. The good news is that the next day we bounced back to above $1220 before falling back. So losses were quickly erased.

    Next, April 8, 2015 was the day that minutes were read from the March 17-18, 2015 Fed Open Market Committee Meeting. I marked that date on the above chart, again with an "M". Here we find that gold topped out on Monday, April 6th, then fell the previous day of the minutes being read, April 7th. Then on April 8th, with the release of the minutes, we hit a low of day of $1199.30, right at the $1200 support level again, and June Gold closed $1203.10. The next day saw a $10 selloff to $1193, followed by a two day rally to hit $1208.80. Again the losses going into and following the reading of the Fed minutes, were made back following the meeting, but it took a little longer.

    Since we are now in a much stronger technical position than we were the last two times minutes were released, I look for more of a positive reaction, no matter what is actually said. In any case, the same $1200 support level that held for the two previous minutes reading days should also hold now, and hopefully the $1210 support level holds and we don't fall any lower than that after the minutes are read. If that is the case, we should easily bounce back towards $1230 by this Friday, May 22, 2015, and could rally towards the $1250 to $1260 target.

    Gold Now Has A Projected Target Of $1250 To $1260, And Possibly As High As $1280 To $1300 The Following Week

    Again, looking at the above chart. back in December 2014, June Gold bottomed just under $1280, and on the chart I circled a "1" to mark the first up day off the bottom. You can continue on for another 10 bars and you will find a bar with Day "11" circled. I marked these days because presently we have traded a similar 11 days off the April bottom. If we continue a similar pattern as we did in January, we should consolidate for a couple days and then boom for 4 days to make a high between $1280 to $1300.

    Back in January, we got a major short-covering rally that we may not see this time. Instead, today's bar might be more similar to the action we had on March 24th, marked with a circled "D" on the above chart. "D" stands for Doppelganger (you can google it). When we bottomed in March, the fifth up day in a row, it the bar that I marked with a "D", and it was the third consecutive day we closed above resistance level of $1180. Now we also have five straight up days and the last three we closed above resistance level of $1220. Back in March, we rallied another $30, in a couple days, to $1220. I am hopeful that now we will rally about $30, into the middle of my $1250 to $1260 target zone. Also the March low of around $1140, to the high hit of $1220, was a rally of $80. If you add that same $80 to the recent low of around $1170, you get $1250. If you add the $80 to last week's support that was holding at $1180, you get $1260.

    If that does not confuse you enough, we rallied from $1180 to $1227 in three days, a gain of $47. We then fell back to $1210 last Friday. That $1210 area should be good support prior to and following the Fed minutes reading on Wednesday. Adding that same $47 to $1210, you get $1257, right in my target zone of $1250 to $1260. If I had to pick an exact price gold hits and then turns down in the next several days, I would say that June Gold futures hits $1257, and then rolls over.

    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.

    May 18 9:07 PM | Link | Comment!
  • DGAZ: Commodity Related Trade Of The Week For Week Of May 18, 2015

    If you have been reading my articles related to Natural Gas, you will know how I recommended buying June Natural Gas when it was trading recently at the bottom, just under $2.50, and later set a target of $3.00, which was met the last couple days. I have now recommended taking profits on that trade, thinking we will now consolidate and soon roll over.

    For those who only invest in stocks vs. commodities, they were buying the bullish triple leveraged ETN (NYSEARCA:UGAZ) near the bottom, below $2, down to the $1.70s. Later I recommended holding for a target of $3.00, which was also met the last couple days. Thursday we hit $3.01 and Friday we topped at $3.08 with a close of $3.01.

    Well, after playing the long side for three weeks, I am now looking for consolidation of the recent gains and a short-term move lower. I am recommending scale in buying of the bearish triple leveraged ETN (NYSEARCA:DGAZ). But before I show a chart of DGAZ and give price parameters, we need to first look at the daily June Natural Gas Chart as follows:

    When I look at a chart of a commodity that I am thinking about going short, (selling at a high price with the intent to buy it back at a lower price in the future and pocket the difference), I try to see how the commodity traded on previous rallies.

    Well, starting at the left side of this chart, June Natural Gas fell straight down from the $3.60s to the $2.80s. After consolidating for a little over a week in the first week of January 2015, June Natural Gas rallied in a couple days to just above $3.20 and within 3 days all the gains were gone. Had one gone short June Natural Gas on the first close above $3.00, they would have gone short at $3.15. The high of the next day was just one tick below $3.23 but closed down below $3.10, putting the trade in a profit of over 5 cents (each cent equal to $100 using the big contract or $25 if trading the mini contract). Within 3 days the traders could have taken profits at $2.90, earning 25 cents profit ($2,500 for the full contract or $625 if playing a mini). Natural gas worked its way lower and a couple weeks later was trading down to $2.70. From that base, another rally ensued. And in late February 2015, June Natural Gas again got a close above $3.00 on February 20th. Selling there in order to open a short position, one would have been filled at $3.037. Like before, the next day we rolled over and after a four day drop, we were trading back under $2.80, allowing for a profit of at least 24 cents ($2400 or $600).

    The next rally we stopped at $2.98 just shy of $3.00, but selling into the $2.97 to $3.00 resistance level one could have quickly profited on a drop to $2.70, to $2.60, and eventually $2.50. Now from that $2.50 level we are now back above $3.00 and I now contemplate going short natural gas since June Natural Gas does not like closing above $3.00.

    Now, I also like to look at a the above chart looking at each 10 cent increment. For instance, suppose I had gone short June Natural Gas the first close off the bottom back above the $2.70 resistance level. I would have gone short on April 30th at $2.75. Although we rallied for a couple days to $2.80 within 3 days we were back down to $2.71, allowing for the $2.75 short to be taken off at a profit. Then when the $2.80 resistance level was taken out, one could have shorted when $2.90 was hit. Since we hit a high of $2.935 and fell immediately back to the $2.80 area, the $2.90 short was also nicely profitable. Well, rallying off the bottom, if selling on the first close above $2.70 and $2.80 made money as well as the first move above $2.90, it is likely that shorting at $3.00 should also work out well.

    What is helping any bear is the nice resistance levels established by previous peaks that come in at $3.10 and just above $3.20. There is also a nice gap to be filled between $3.25 and $3.30. If one started shorting now just above $3.00, and shorted again in the teens (between $3.10 and $3.20) and then again in the $3.20s, one should do great on the trade. It is very possible we won't even make it to $3.10 before rolling over, let alone $3.20 or higher. I will now put on a chart of DGAZ so traders can see what prices this natural gas translates to, as follows:

    (click to enlarge)

    On Friday, DGAZ closed at $4.83, having fallen from $9.00 that was hit when natural gas was bottoming in the $2.50 area. June Natural Gas is sitting around at $3.01, so if it rallies to $3.10, a gain of 3%, then DGAZ should fall about 9% from Friday's close to about $4.40. A rally to $3.20 in June Natural Gas, would drop DGAZ to around $3.95. I consider it highly unlikely June Natural Gas moves above the $3.25 level, which would translate to an extreme low in DGAZ of $3.75. With a possible drop of as much as about $1, one might want to buy DGAZ around $4.80 and then adding every 20 cents lower, buying more shares on lower priced buys.

    If June Natural Gas would fall back into the $2.80 level, DGAZ should rally to about $5.80. If you get your average price of DGAZ down to the $4.50 to $4.40 area, potential gains of over 30% would appear to be possible if June Natural Gas cooperates by rolling over somewhere between $3.00 and $3.20, and falls back towards $2.80. I plan to make this trade in my own account this week and you can follow me in the $DGAZ Stocktalk.

    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.

    May 16 11:48 PM | Link | 2 Comments
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