Precious metal Review

We've had a few posts on precious metals, especially when they were crashing: precious metal support  and gold support . 

We wanted to review a host of precious metals that we follow.  As we're written in this blog and in our newsletter for years now -- for us gold is meant to be bought at support and not at breakouts (as opposed to tech for example).  

ABX held on the 200 SMA and can be bought on any pullback with stop on 200 SMA break.  First target is the 50SMA.

 As we posted real-time on StockTwits today we entered AEM swing at 69.77.  We think it can do 74.  Our stop now has been moved to break of 71.

 ANV fantastic price action -- note how buyers never even let it hit the 200 SMA and it's nearing new highs.  Too extended for us but we'll definitely pay attention on the next support cycle.

 BVN went through the 200 SMA but held on the longer time-frame ascending trendline .   Today it broke up through descending trend-line and looks good to go to at least the 50SMA.

 Our mistake in silver stocks was wanting too deep a pull-back.  Buyers snapped these up before our support got hit.   Note how 100 SMA held on CDE ( we wanted 21).

 EGO held right on support. 

 We would have picked up EXK aggressively on the 200 SMA but alas the daily support held -- very nice bounce and through the 50SMA.  Too extended for us -- we'll have to wait on this one.

 GDX went through on daily 200 SMA, and not much of a pattern here but...

As you can see, perfect weekly bounce on the 50SMA.  Very nice follow through and we bet there are many stops under that 50SMA.  That's the line in sand for gold position traders. 

GDXJ very clean hammer on the 200 SMA -- acts even better than GDX and has our full attention. Today it broke the trend-line and looks like an easy trip to at least the 50SMA above. 

 GLD undercut support and now has stopped at the 100SMA -- we were too cheap here wanting just a few more points downside before getting in and missed the boat.

 Through trend-line today and looks good to go for 50SMA visit.

 HL very nice clean bounce on support and 100 SMA.   The 50SMA above now will most likely slow down this bounce.

IAG very impressive chart here -- big break of trend-line on weekly.   Very impressive.

 Another impressive name here in the sector -- note how strong the stock held as the sector was hit in early Jan.  

 For the most part silver held support much better than gold -- MVG's 100 SMA was like a wall, now taking off.  Should see 50SMA easily.

 Our least favorite stock in the sector due to how messy/edgeless it is but worth watching because it's a significant portion of GDX.

 NG through trend-line with no problem today.  Nice clean chart.

 PAAS didn't hit our 200SMA level and instead bounced on daily support. Today paused at 20SMA.

 We dislike RGLD probably as much as NEM.   Messy chart, no clean edge.

 SIL is good to watch as silver miners ETF.    Held daily support -- and big bounce but watch for it to at least pause at the 50SMA.

Held daily support and didn't make it to our deeper 24.5 number -- very loved sector.  Through the 50SMA today and looks like it wants more.   We're seeing a lot more momentum and love in silver than in gold.  

Our favorite stock in the precious metal sector -- bounced on daily support and now heading to the 50SMA. 

SSRI also held support and didn't make it to the 200 SMA -- for the most part there were too many buyers like us who were waiting for support triggers and when that happens often the stock reverses just short of the level you're stalking.  It also is evidence of how liked the sector still is among traders.

Bounced on daily support but now should at least pause at 50SMA.  Too extended for us to get involved but great price-action off the bottom and one we'll definitely watch in the near future. 

What's going through our head

Update:  after the close our usual scans actually came up with a decent list of alerts (as opposed to when we wrote this post earlier today).   As always, if they set-up tomorrow, we will be involved.  But we will keep things tight and will be in pure-daytrade/ hit and run mode as we wouldn't be surprised to see alerts hit, get initial spikes up, and then see an intraday reversal.    As our readers know well -- No matter what our opinions we will always defer to our alerts and our set-ups. 


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There's lots of stuff that's been going on in our head these last few days and we've touched upon a few of the subjects on Stocktwits and in our Newsletter but here's a quick summary.


First of all, and the biggest red flag of all, we basically have no good alerts left.  We have a few we're stalking but usually our lists are much more full.   The HCPG-alert indicator has proved its worth to us over the years and we rely on it heavily.   When we have no alerts, we feel no edge.  

On to more specific subject matter:

The USD is against major support.  Support of course can always be broken, and this one looks like it might, but usually what happens when you hit support as established as this one is at least a feeble bounce, be it dead cat or not.

 We posted this one a few days ago and nothing has changed -- against massive resistance while USD against massive support.  In our experience that is not a recipe for good risk-reward long.

There are many more examples of sectors hitting major resistance (including SPX itself) but let's end it a look at the Trannies which also are heading into major resistance from a massive move from the bottom. 

As short-term traders however we are always open to possibilities, as unlikely as we think they will be -- and the one we have to keep at least in mind is the USD breaking down through support without any bounce sending the market, and especially commodities,  ripping through resistance.   We think this is unlikely and if it does occur we have no problem underperforming for said time period.    We've survived and prospered in this business for over 14 yrs by not trying to catch every tick, but by entering positions in which we saw good risk-reward.    Our feeling is that when we have to think so much about everything instead of it being automatic, it means it's best to chill. 

We had no triggers today from our newsletter (a rare event) and spent the day in scalp mode around ES_F, NQ_F and SI_F which is what we usually do when we have no stock alerts to focus on. 

 On an additional note:  we have a new affection for silver due to how clean and technical the moves have been lately.  We noted late last night that SI_F was against the 50SMA and had travelled a long way -- it promptly reversed from that point on but still above the trend-line.   A move over the 50SMA most likely would gather some momentum.

Precious Metal Spots

Out of all the commodites we trade we probably are the most careful when we trade precious metals.   We pick spots we love and if they hit, great, we take the trade.  If they don't, we don't get involved and focus on other sectors.

Here are some support long trades we're interested in -- on average they're around 7% away.  Maybe they'll get hit, maybe they won't, but we will not get involved early (i.e. before they trigger).  Buying the FIRST test of major support in oversold panic dives down is one of our favorite strategies.

Edited -- added two gold trades that are ready right now.   Silver we'll still wait on (even though we imagine it will bounce with gold). 

We will definitely get involved, for a trade, on GLD 124 long.   Quite a bit away, but again, for us the edge is there and if we don't get our trigger, we won't be involved.


Note how trend-line, daily support and 200 SMA all converge near the same area -- exactly what you want for a support trade.

Update:  a few of the gold miners look like they want to bounce.

AEM holding on 200 SMA -- decent risk reward here long. 

GDX oversold into 50 SMA,  like it right here right now for a trade. 

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First test of SLV 24.5  (SI_F 25) should be good for a trade.    

CDE 21 we like.

EXK at 5

HL at 7.5

PAAS at 29

SLW at 28.4 area

SSRI at 21

The more stocks in the same sector that hit support simultaneously the higher the chances the support will hold.   Many of these are around 7% away -- if we can get a number of them to hit support on same day, while in oversold status (we don't like basing above on daily) then we will get involved aggressively.

This post is supported by scrap gold

Bulls and Bears: Market Talk

We're wary of breakouts but at the same time we're still interested in buying support:  by saying that it means that we're assuming market will go down more but it won't experience a straight out rout.   We're still seeing some rotation, mostly into the stodgy more conservative sectors (take a look at Dow Jones versus Russell for example of this rotation from high beta to low beta).

Let's start with the bull case:

Nothing wrong with SPY technically here as it seems to be digesting the huge move and still above all major moving averages and firmly within a bull trend.   

Whether you trade it or not as a trader you can't deny the importance of GE as it has a finger in many different types of business.  Stock is booming. 

Semis have given back a bit of exuberance but still firmly in the bull territory.    

The financials also are off their highs but still looking pretty healthy technically.

The Dow looks great -- symbolic here of safety over momentum as many stocks in the index are holding strong (for example CAT CVX DD DIS GE HD IMB KFT MMM PG UTX WMT XOM).

Now let's take a look at the bear case.

FCX is one of our favorite tells for the last few years as commodities have led this market.  Unless this relationship has changed this is a huge red flag for overall market.

FCX broke through the 50SMA and looks like it's heading to retest the 100 level and to be stuck in range for a while.

China has been underperforming for months and still can't find a bid.   

The Russell shows more the true nature of what happened last week (at least on stocks that most traders like to trade) as it got spanked hard.  We think that the 50SMA is going to flatten out here and we'll be stuck in a range without making new highs intermediate term. 

Trannies are also another great tell that we always watch -- same thing here as the index barely got a bounce on the 50SMA.   Look for it to flatten out and possibly break as a new lower range is carved out for the intermediate term. 

KOL also flattening out on the 50SMA and we expect coal stocks to be dead money for a while. 

GDX hit major support and managed a small bounce. We're out of our gold bounce names now and will be watching this sector for deeper support levels (still quite a bit away).

And last but not least:  AAPL earnings really could not have been any better.  Has there ever been a company this big with this type of growth?   And what did traders do?  Sell it, and then sell it some more.

AAPL most likely will be dead money for a while even though we would be surprised if the stock turns out and completely rolls (quite possible it tests the 300 level though).  We'd be buyers of the 280-285 level which would be a 15% hair cut from here.  Asking for a bit too much?  Most likely, but that's where we see the best edge.  

Too mixed a scene for a new bear market, thus far anyway, but also too many cracks in the foundation for this to be a short-term (i.e. one week) pullback. We believe there will be a rotation into more boring, stodgy stocks (we're scanning through medical appliance stocks for longs!) while high-beta momentum tech and commodities chop around trying to find a new range. 

So how are we trading this?  A few longs, a few shorts, and some decent commodity support levels coming up.  Everything pretty short term and taking it one day at a time with no big bets either way.  We'll go through the sectors every weekend to come up with clues on near-term (the only timeframe we care about) direction.

Support Buying Talk

The best support buys are the ones in which multiple stocks within the same sector hit at the same time.  This makes the success rate go up exponentially compared to a singular stock hitting support.    Gold a good example today as three of the major stocks in the sector all hit support and bounced today.  We think this will be a short term bottom in gold.

ABX BVN AEM  all hit major support today.

What a base

We're long SHLD in our long term account (1/5 starter from 75.2 which we unfortunately never added to) and we like how it's looking.  The pattern is still wide and ideally needs more time but with today's momentum it might not wait too long.   Great base that breaks out at 79.

Just last night we wrote in our newsletter: 

"Our Long Term account still holds 1/5 BRCM SHLD.   We thought about selling them today and buying them further down but it's a small starter position and we're just going to sit.  If things get ugly we'll probably will add (and post it in newsletter when we do)." 

 

 SHLD very difficult to trade short-term and we prefer to put on a small longer term position as long as pattern is valid and just sit.    

Market Talk

Two notes:  as tweeted this AM sold out of SLW BRCM swing longs in trading account.  Trading account now all cash.

As we wrote here yesterday and for our readers last night -- we simply do not have any good set-ups right now which usually is a great indication that we're in for some choppy action.   If market is resting we should get longs in a few days.  If market is topping we'll start to see shorts soon.  But for now it's a good time to relax and let the others fight it out.

A big part of trading successfully is simply knowing when to step on the pedal and be aggressive, and also when to stop, get out of the car and go for coffee. 

Market Talk

On the bullish side we've had six triggers today from our newsletter and all are green and gave a good trading opportunity  (in that they all gave at the very minimum 2 x risk/reward).  

As extended as this market is we will only stop looking long when we see two things happen:

1) broad sector/breadth sell-off instead of rotation
2) support buying stops working as dip buyers stop showing up.

However, one note on the cautious side:   our best set-ups, one's we have been stalking for many days on the newsletter, all triggered today (MELI CAT ATI CRS CMI AGU).    We don't have that many good set-ups left and what this often indicates is that the market is heading towards increased volatility.   Because of this we'll only be swinging partials on any trades initiated today and only the ones that give us a comfortable cushion.
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Update: we ended up swinging no positions from any trades that were initiated today (even though ATI CRS were decent candidates we opted to just cash it in and raise cash)  and only have left partials on SLW BRCM in our trading account from last week.    (BRCM SHLD in LT account).

Longer term charts

For position trader readers here are 3 longer term charts that we absolutely love.   We're very confident that all three will trigger their breakout prices (BRCM 50, OXY 100, SHLD 79)-- but we just don't know when!


We already have a 1/5 position in our long term account from 45 in BRCM and will add on any pullback.   We love the multi-year base under 50 -- just a matter of time it goes and this year could be the one as smartphone story gains momentum. 

OXY 100 has been on our list for a long time and we love the potential of this chart - however we would prefer it to carve out a flattish phase now under 100 to work off the extended nature of the move from late 2010.   

 SHLD can be a demon to trade on a short-term time-frame but we like it for longer term swing once it tightens the pattern under 79.  Very nice base. Started 1/5 position in SHLD at 75.2 to join BRCM in the long term account.  Expecting a lot of basing and filling under the 200 SMA/79 resistance but wanted to get involved with starter position. 

Market Talk

We aren't too active today with only 2 trades triggering -- both alerts we've had for days in our newsletter.  FSLR 136 breakout which didn't do much but was good for a quick trade and NFLX target trade 185 (target trade meaning you enter below the number on a base and break/Indy -- in this case it set up at 184.1 at 11:55AM and take first partial out AT the 185 alert. Anything beyond is bonus).


SPY third test of 126.2 support held again which shows the astounding bid in the market right now.   As our readers know we LOVE buying support but as a rule we buy the first test of support and never the second (if short time has lapsed between the tests) and certainly never the third.   Nevertheless, it worked like a charm today and dip buyers were again victorious laughing all the way to the bank.   No regrets though on missing this one especially since we didn't have any support alerts trigger at the same time.

We had a good question today from a reader who asked us "doesn't support become more valid the more times it tests the number?".    The answer is yes and no.  If for example stock HCPG has tested 50 support three times in four years then yes this is a very important support that has to be respected.  But if a stock keeps banging on support within very short time intervals (and 3 tests in 5 days certainly qualifies as short time interval) then no, the risk-reward of buying support for us becomes too low.

Usually what one sees when stock keeps repeatedely bouncing on support is that the bounce becomes weaker and weaker until it finally bases on support and falls through.   However that being said that pattern is a lot easier to trade on stocks than on ETFs (we rarely short breakdowns on ETFs, almost always our shorts on ETFs are resistance shorts, and not breakdown through support shorts).


It's a mixed picture out there and we don't have that many breakout longs nor breakdown shorts.   As always, do remember that all talk is just that, talk, and all we do in the end is trade the set-ups.

Why we hate predictions

Crude is down 5% from its highs earlier this week, gold down 4%, and silver down over 7% and yet the Nasdaq hit a new high today.   The Nasdaq being a better comparison than the S&P 500 as it doesn't contain nearly as many commodities and is the "momentum" higher beta index.  Financials are not even 1% away from their highs.

This is evidence, thus far, of classic rotation.    The big million dollar question of course is IF the commodity sell off accelerates, will the market finally be pulled down?    However, attempting to predict the answer, for our type of trading, is completely irrelevant. 

This is all we do:  everyday after the close we go through a core set of stocks looking for set-ups.  We add alerts, put them in newsletter, send it off, and then trade accordingly the next day.   If market starts to crack, we'll see it in the set-ups. 

Don't worry so much about the big, bad correction.   All markets correct, and eventually we'll get one, be it next week, next month, or next quarter.   But it won't happen instantly -- you're not going to wake up to a 5% gap down and then see market die for next 3 months.   Trends as strong as this one are like giant ships -- it takes a while for them to turn around.  Thus far we've had an important red flag and that's the commodity weak price-action.  Commodities are often early indicators of corrections, but not always.  Basically,  as long as there's no contagion to other non-commodity sectors, it cannot be construed as bearish for entire market.

Before getting grizzly bearish we'd want to see financials die, tech leaders such as AAPL GOOG get hit hard, transportation stocks roll over, and most importantly, we'd want to see support buying cease to work.   Bear markets don't care about support.  They eat them for breakfast.  Support buying is our specialty and we'll be the first to know if it ceases to work.   Until that (very sad day) occurs in that we get stopped out on our support buys instead of seeing green, we'll be buying the dip on oversold sectors hitting support.    

So relax, take it one day at a time, and don't worry about predicting anything.   Just watch the price-action, trade your set-ups, take your profits, respect your stops, and trade accordingly.  That's it.  And leave the market predictions to the CNBC "gurus".  

Market Thoughts

Today's big rally decimated our alert list (we had 8 long trades trigger including our best set-ups that we had been stalking for weeks, including NTAP 56, VMW 92).   As a rule we never go counter-trend if we have a lot of alerts that still have yet to trigger, i.e. we never go short if our list is full of long alerts that haven't triggered yet.   However every once in a while a big rally empties our alert list such as today and when that happens we give ourselves the green light to go counter-trend.  We're expecting choppy action going forward (also note the divergence between market and commodities today which printed some exhausted candles) and are in scalp mode with a focus on shorting euphoric spikes up.

However all this being said: even a few days of flattish action would set up a number of new long alerts.   Definitely too early to call a top but can't be blind either to signs of a tired, extended market, especially if you have a very short time-frame such as we do.   Traders with longer time-frames have less to worry about as the market could simply base before grinding higher. 

ANR, one of our favorite trading stocks,  a good example of what we're talking about as it printed a gravestone doji today:

When we see exhaustion moves like this then we often go short for daytrades.  Not shorting weakness, but shorting euphoric buying as panicked longs chase exhausted moves up.

Huge run on ANR -- and extended from the base at 56.5 (where we had alert on the HCPG newsletter last week).