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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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  • Repros Therapeutics Inc. (RPRX) Looks Like A Buy On The Current Selloff

    I ran across an article entitled, "8 Stocks That Analysts Think Will Double" click here. After reading the article, I reviewed the chart pattern of all 8 stocks, and the one I thought was most interesting, was Repros Therapeutics Inc. (NASDAQ:RPRX). It is a biotech stock that appears to show a lot of promise, but like all biotechs, it is subject to fits and starts and occasional setbacks. Recently the stock was knocked down when a drug trial was delayed. For more information about the company, click here. Trading in a 52 week range of $8.46 to $28.99, picking up the stock currently below $11, looks like it could be financially rewarding. Take a look at the weekly chart of RPRX:

    (click to enlarge)

    You can see how RPRX took off from the $4 area in March 2012, first reaching $10 and eventually $19.12 in January 2013. However some disappointment in drug trials caused a selloff quickly to $10, a bounce back to $15 and ultimate bottom in March 2013 of $8.42. This was an important bottom for the stock. Within just 5 weeks, RPRX would make a new all-time high of $20.78 in April 2013, and eventually hit $29.79 in September 2013. Recently the stock was trading in a range between $14 and $22. That was until a recent drug trial delay knocked RPRX back down last week, to $8.46, very close to the major low hit of $8.42 in March 2013. With price targets by several analysts in the high $20s, getting this stock under $11 should be financially rewarding. Here is a look at the daily chart:

    (click to enlarge)

    The optimum time to buy RPRX was last Friday, when the stock gapped back above $9. There is a gap left from $8.96 to $9.23 that will likely not get filled anytime soon. I plan to buy some shares now below $11 and will add on weakness if the stock tries to fill the recent gap. When RPRX sold off in February and March of 2013, the stock first tried to bottom just under $10, but then made a secondary lower bottom of $8.42. The same thing could occur again this time, with $8.46 being the initial low, and a secondary bottom coming in at a price closer to $7. In any case, I will put the stock on my radar screen and will buy a few shares now, with the intention of accumulating more on any weakness if it tries to fill the gap from $8.96, or if it makes a new low under $8. I would not be surprised if the stock just starts moving higher shortly.

    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: The author has no positions in any stocks mentioned, but may initiate a long position in RPRX over the next 72 hours.

    Oct 03 5:43 AM | Link | Comment!
  • How Bad Could It Get For The Gold Mining Stock ETFs: GDX & GDXJ?

    A Look At GDX

    (click to enlarge)

    During the financial crisis back in the middle of July 2008, the large gold mining stock ETF (NYSEARCA:GDX) topped out at $50.22. But in less than 15 weeks, GDX would fall to a low of $15.24. However just 4 weeks prior to making that bottom, GDX hit a high of $37.52, so almost all of the damage was done during that last month. Then just as hard and fast as GDX fell, it sprang back to a high of $33.38 in just 8 weeks after bottoming. Meanwhile the gold metal during this same time frame fell from $980 to about $740 from July to September, before quickly springing back to $920. During this pop back to $920, that was when GDX rallied back up to $37.52. But when gold retested and broke its recent low in late October 2008, falling to below $700, that is when GDX made that last 4 week dive into the $15s. A rally in the metal back to $870, got GDX to the $33.38 high. From there, both gold and GDX continued to work higher for nearly three years, until we reached the September 2011 high in gold above $1900. We can now take a look at a weekly chart of GDX going back 3 years to the end of September 2011, as follows:

    (click to enlarge)

    It is obscured by the printing, but GDX hit a high of $62.28, the first week of November 2011. This was close to the September 2011 high of $65.49. Quite a drop for GDX to fall to $22.00 in June 2013, a drop of 66.4%, nearly 2/3rds of its value. Gold will have fallen from just over $1920 to about $1183, a drop of 38.4%. During the selloff, the miners fell about twice as much as the metal, which is expected due to the fact the miners are leveraged to the price of gold. Then in December 2013, GDX would fall to $20.18 while the gold metal was still bottoming at $1182. The metal did not really make much of a new low, but GDX would fall an additional 8.3% from $22.00 to $20.18. Fortunately, by March 2014, GDX would hit $28.03, a gain of 38.9% off the $20.18 low. After dropping to $21.93 in late May 2014, GDX rallied 26.7% to hit $27.78 in July. During the past five weeks, the selloff in GDX has been brutal. During the month of September 2014, GDX fell from $26.69 to $21.36, a drop of 19.8%! Meanwhile December gold fell from $1287.40 to $1211.60, a drop of 5.9%. The miners have fallen over 3 1/3 times faster than the metal this month! If gold should continue to drop to the $1183 area, another 2% lower, then GDX should fall about 4% to maybe $20.50, very close to the December 2013 low of $20.18. What does this all tell us about the future?

    Well, the major low of $22 in June 2013, was resolved with a rally in 9 weeks to $31.06. The December 2013 low of $20.18, allowed for a rally to $28.03, and the late May 2014 low of $21.93 caused a rally back to $27.78. It would seem logical for the gold metal to now bottom, at least temporarily, somewhere between $1180 and $1204, which should get GDX to bottom around $20.50 or higher, and cause a snapback rally within a couple months towards $27. Even if GDX should break below $20.18 on the current dip and fall to $19 or even $18, GDX should easily recover to $25, even if should continue in a long-term bear market. Although it would have been better to buy GDX right here than where I bought it at just below $23, I still should have no problem selling out at a profit on my highest priced shares, within the next couple months hopefully. This is the way I see it.

    When GDX bottomed in the $15s in 2008, it would go up 300% to above $62 in about 3 years. I would not be surprised to see gold trading above $2000 just 3 years from now, in September 2017, and GDX gaining 300% from current levels, to over $80. A strong economy going forward, will not only benefit the stock market. It will benefit the gold market too, as more and more people in developing countries acquire the means to purchase more gold and other precious metals. Gold is getting harder to mine and more costly to mine, and most current reserves will be depleted within the next 10 to 15 years. Current low gold prices is forcing miners to cut back drastically on mine development. There will not be sufficient production in as little as 3 to 5 years to meet current demand levels. But while mine production is on a path of drastic drops, demand in on the path of dramatic increases. The fundamentals going forward look very encouraging. After hitting a high of $900 in 1980, gold would fall into the mid $200s during the bear market that followed. Who would believe that in 2011, gold would again hit the $1920s an increase of over 650% from the $250s. Should we bottom during the current bear market around $1200, a gain of 650% projects a future gold high of $9200. If gold bottoms at $1,000, then $7680 is our ultimate upside target. Should we fall to $700 in gold, then we would have to settle for $5375 in the future.

    During the bear market, the gold miners have fallen twice as hard as the metal. All the bad news will soon be factored in, and the metal will bottom, pulled higher by the miners rebounding. On the rebound, the miners should gain at least twice as much as the metal. Stocks are supposed to discount 6 months into the future. The miners should bottom even before the gold metal does, and any short covering rally in gold could be explosive in the miners from current levels.

    Quick Look At GDXJ

    (click to enlarge)

    The Junior Mining ETF (NYSEARCA:GDXJ) began trading in November 2009. GDXJ topped out in April 2011 at $155.20. Dropping to current prices of around $34 is a drop of 78% off the highs. Here is a more recent weekly chart of GDXJ as follows:

    (click to enlarge)

    GDXJ is outperforming GDX as GDXJ has not taken out its May 2014 low of $32.43 and is far from the December 2013 low of $28.87. If the low of $32.43 is taken out, GDXJ could fall to $31.40 or $30 at the worst, as I see it now. Such a fall in GDXJ would be the result of gold taking out $1180 support and getting everyone short at the bottom, in the $1130 to $1150 area.

    The triple leveraged JNUG closed today at $11.82. I have calculated a likely worst case scenario of JNUG hitting $9.45 on this low, a drop of 20% from current levels. That assumes that GDXJ stops falling around $31.40. If GDXJ should fall to $30, then JNUG could hit $8. Suppose it does. If GDXJ falls to $30, then I would expect for GDXJ to rally about 50% on the next rally off the extreme lows. That would cause JNUG to rally 150% or $12 off the low. That projects JNUG returning to $20 in the near future. I am hopeful that $9.40 holds the bottom in JNUG, so it can rally to $23.50 on the next rally. It would be a nasty ride holding through the lows, but if I have to, then I am prepared to do it. If GDXJ falls all the way back to $28.89, then JNUG would bottom at $6.85, and then should bounce quickly to $17.12 on that first big pop out of the bottom.

    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: The author is long GDX, GDXJ, JNUG.

    Sep 30 10:47 PM | Link | 9 Comments
  • What Should A Trader Who Bought Cliffs Natural Resources (CLF) Above $15, Do Now At $11.44?

    Introduction

    Someone just emailed me telling me they had 100 shares of Cliffs Natural Resources (NYSE:CLF) at $15.35 and wondered if they should add to the position or to just cut their losses. Well, before we answer this question, lets try to figure out how we got into this situation and how we might better stay out of trouble in the future. This trader is caught in an untenable position that could have been avoided. I try to always do the wise thing and not get myself caught like this trader, but I am not infallible. I have made, and continue to make novice mistakes, but I do try to keep the number of such errors small. Also, my years of experience has taught me both how to stay out of trouble, and how to mitigate the damages if I do get into trouble on a trade. I am writing this article to give pointers that may help others in this regard. They are reminders to myself as well. We can start by looking at the weekly chart of CLF as follows:

    (click to enlarge)

    Let me start by saying that I started playing Cliffs Natural Resources Inc. (CLF) in March 2013, as the stock broke down to $20 and eventually bottomed at $17.20. I bought all the way down by scale in trading, and on the quick rally back to $20.23, I made a nice profit, and again, after falling back to $16.03, caught much of the rally back to $22.79 in May 2013. I was hooked. I would then get in again on the dip back under $20 and fought until a new low down to $15 finally held support. The $15 area was great value and the stock rallied to $25. I got out in the low $22s if I remember correctly, and missed the big rally in November to $28.13 (see chart).

    In January 2014, I again got interested in CLF and began buying when we again reached $20 and below. The high to low $18s were support and a rally back to $22.96 again rewarded those brave souls who scale traded into this stock.

    In March 2014, CLF stopped falling around $17 and in three weeks rallied back to $20.77. Then came the massive 10 week selloff down to a low of $13.48. I bought CLF heavily around $15, thinking that was still good value, only to see CLF move lower. However, after 3 weeks, CLF did rally to $16.36 and I was quite relieved to be out of the stock at a small profit and then left it alone for awhile. Casablanca Capital was trying to get their own board members approved, they were pushing for a new CEO, and they wanted to company split up to enhance shareholder value. Part of these things were accomplished and the stock would top out at above $18 in late July. I missed this final rally as Casablanca Capital was now starting to get their way with the board, and all good news was getting priced in. The stock looked vulnerable for a selloff, which came quickly back to $15.

    For nostalgia reasons I guess, I did scalp the stock just above and below $15 on the selloff three weeks ago, but after a few days and looking at deteriorating fundamentals, I decided to abandon trading the stock. However, the stock is very tradable if one adopts a scale in trading approach, and the drop below $12 is probably overdone. Dropping from $18 back to $14, I would consider as one leg down. Dropping down another leg, we should find good support at $10, which would be another $4 drop from $14. I anticipate a bottom coming in between $10 and $11 in the near future, and I may scalp for fun in the stock, but probably won't commit lots of money in the position. Anyone getting in now, I would recommend buying very small on dips of 50 cents to $1. Don't be surprised if CLF does indeed drop to $10 and eventually maybe down to $8. However, if CLF does fall from the recent high of $18.25, down to $10.00 lets say, I would look for a Fibonacci retracement rally off the bottom of 38%, 50% or $62. From a $10 low, CLF could easily pop back to either 13.13, 14.12 or 15.11. With this information, we can now answer our question.

    I Would Not Panic Sell Now

    If one sold out at a price similar to today's close of $11.44, that would be giving up and selling at the bottom or close to it. The bottom should be somewhere about 44 cents to $1.44 lower and one can hold through the bottom and wait for that pop to $13 to $15 to take a much smaller loss. Better yet, one can buy another 100 shares in the $10 to $11 area, to average down the 100 shares purchased at $15.35 and maybe get even on a rally of 50% to 62% off the low.

    How To Stay Out Of Trouble In The First Place

    The trader that emailed me probably bought CLF partially on the fact that I was buying 3 to 4 weeks ago, on the return to the low $15. I got in at a price similar to $15.35, but continued to add when the stock fell to lower prices. Check out the daily chart of CLF to see the action:

    (click to enlarge)

    On August 28, 2014, I began buying CLF in the low $15s as the stock would close at $15.03. But the next trading day CLF hit a low of $14.68, where I bought additional shares, lowering my breakeven to just above $15. When the stock closed that day at $15.07, I liquidated the entire position with a very small profit. It was a Friday and I wanted to be flat over the weekend. Over the weekend I studied iron ore price information and concluded that CLF was vulnerable. When CLF sold back off on Tuesday Sept 2nd, to a low of $14.52, I did not buy it and declared that I was going to leave CLF alone now, which I did. The next day when CLF popped back to $15.27 on a rumor during the day, I was feeling silly for not buying the night before to catch that pop. But at the end of the day, when CLF closed weak, I was glad not to be in.

    But for anyone who bought at $15.35, one could have still bought another 100 shares somewhere around $14.50 or as low as $13.64 over the next week. If one was only going to buy 100 shares above $15 and stop, then one would have been better served to buy only 50 shares at $15.35, another 50 shares at $14.55, and another 50 shares maybe at $13.75, for an average of $14.55. Then on the pop back to $15.40 on Sept 17th, the trader could have gotten out easily at a profit.

    Now suppose the trader had 100 shares at $15.35 and held thru the dip and tried selling at $15.49 and missed getting out by 9 cents. Then as the stock rolled back down below $15, one should be able to see that 50 shares had to be sold at a loss so that funds are freed up to buy lower. In this case, that would not have helped much as one might have bought again around $14. The next day the stock would gap down hard below $13.64 support and continue to fall. That would be the spot to give up and vacate the trade. Having passed up that chance, the prudent thing now would be to wait for a return to $13 to $14 on a recovery bounce, with additional shares bought between $10 to $11 so that one can hopefully sell out at breakeven.

    The good news is that 100 shares is not going to break any account, regardless of size. It is a good size to practice on though and this is a good challenge for this trader to see if they can figure out a way to break even, or at least get out with a smaller loss than the nearly $400 they are presently losing. Again, I would wait for a rally back to $13+ to sell, hopefully with a few cheap shares added.

    Extremely bearish news related to cheap iron ore prices and weakness in Chinese demand, has depressed CLF. I have calculated that this new development accounts for about $3 of the current CLF weakness. Thus, $11 now was the previous $14 level of support, and $10 now, would be like buying at $13 before. If not in the stock, the $3 adjustment is already being priced in, and one should be able to buy this dip using scale in buying every 50 cents or $1. I am going to hold off buying right now, but will watch the stock closely and monitor news and commentary to see if I want to buy somewhere during the current bloodbath.

    Notice that the last five days CLF has fallen straight down really hard and fast. Before the angle of descent was not nearly as steep. I call this "shape". CLF is showing "shape" which is what one gets during times of capitulation. Thus, when CLF does bottom, it could bounce back very hard and fast, and be worth the risk. Too early to tell, but the stock could be an interesting play in the near future.

    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.

    Tags: CLF
    Sep 26 12:15 AM | Link | 9 Comments
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