Friday- Option Expiration And Rotten Fruitage
Its option expiration and often we get a large push of volume . The markets are looking more and more like they are heading in the direction that I have been calling for.
I pointed this out on Jan 6
It has followed that exact path and this is what I am thinking going forward…
AUDIO
(Click the link , click ‘download’, click “open” , when it plays, return & follow along here) http://www.screencast.com/t/RGc49fD6Rzz
QQQ
I have strong reasons to believe that the Markets are trying to seek out Oct lows. Options expiration could shove this off the cliff and I almost bought TZA yesterday. I almost bought TZA at that tag of the 50sma overhead. I will come right out and say it….I have a harder time “Timing” a short position in such a strong bull market where Buy the dips has been so successful. I have repeatedly said that this looks weak and I think we see rejection at the 50sma, but I couldn’t recommend TZA or FAZ or SDS then. NOW I feel we are going down. We are at support here, if we bounce I may recommend shorting. TRADERS could short a break of the blue line , but you know that it could flip up & test that break too. Shorting is tricky to me, Overall, It could be a high volume low being tested on lighter volume, and then it will be a great long opportunity. HOWEVER, I also see reasons to believe that this could get really ugly and break through those lows.
There are other things to look at and I will cover this area in the weekend report. I see Changes that need to be addressed and it could result in opportunity for those who like to short. QQQ looks ready to fail. SPX is close , IWM not so much, so if QQQ goes and you miss the TZA play, we will watch SDS for the SPX or other areas. I want confirmation first that this is falling apart and I still have some support in these areas. I tend to play it safe when your money is involved. Personally, I wanted TZA yesterday, but My money is with Metals and Miners too.
I think OIL may bounce here. WHAT?? I pointed this out already here on JAN 9
Now I see this … it didnt CLOSE over the 10sma, but if it does, it may BOUNCE.
Does this mean I recommend it as a long? NO- But some are asking me “What about OIL? I want to buy $UWTI for a quick trade” OUCH!! For those asking about UWTI. That is a 1 or 2 day trading vehicle in this case, with OIL acting the way it has. It has been a sharp sword of death to some that I have seen in other blogs. I watched someone put 50% of his net worth in it at $6. He is still waiting. If oil drops to $40? I cannot recommend it, but for a FAST TRADE , maybe try UCO? Energy stocks still arent acting completely correctly, but some are improving. (Maybe I’ll put that in the Weekend report?)
HERE IT IS…NATGAS.
JAN 7 – I was Pointing this out , so we could watch for improvement.
Got this break out, which was the buy…
I said in my report that I would like to see it just drop lower, we have that RIGHT NOW. This was UNG yesterday . It is now even lower as I write.
You could buy NATGAS, UNG or UGAZ ( 3X – Be careful, you can lose a LOT!) It seems this gap will fill and price could test the trend line or 10 & 13 sma.
As I write UNG pre-mkt is $15.50
Those waiting for NATGAS, yes this is a buy, but keep a stop, especially if you use UGAZ. Your trade is your own . OIL/NATGAS is dangerous at this time, but now NATGAS is acting slightly bullish.
$GOLD...What can I say – For those shorting and doubting, it may look more believable now. It blew right through the 200sma and prior pivot with strong volume. It is at resistance here however. Can we get follow through? I’d LOVE to see a break of say $1275 today . Shorts could panic.
I think we can, but I did notice that prior breaks upward dropped to test the break area, so GOLD could drop to $1240ish and not be a bad thing. I think it wants $1320 though, and fast.
GDX has been strong, dont listen to the naysayers. Its at resistance and can delay/pullback, but It broke above the $20 resistance, is well above its 50sma and that is now curling upward. Since It has completed an A-B-C-D move on a wkly and is at another resistance point, it could pause. So likely depending on GOLDS future move, It MIGHT break through, it might pause & build energy. This chart was only mid-day. Volume was great at end of day. I’ll tell you why I think we break through here….
When hitting resistance I ask myself, “DO I see positive signs of strength?” Anything that can help. I pulled these 2 charts mid day yesterday ( I was going to do an afternoon report update, but decided to wait till the day ended, so these BULLISH charts are even more bullish by days end.
GG- great volume 18 million at 2:45 P.M. (Ended with almost 25 million)
ABX, many have been worried. I think it became a BUY THE LAGGARD yesterday. Or BUY ABX today . It had 50million at the close !! BUY here or BUY above the 50sma , I think it has lagged building a base, but that volume was strong. NEM was strong too. We could break higher in GDX here today.
SO for a Friday review, that’s it. One trading day left. I will have more thoughts in the weekend report, but I still see weakness and a possible collapse to OCT lows in the markets. Metals and Miners has been the trade this year. OIL and NATAGS are looking bottom-ish, but its still hard to trust OIL in my opinion. NATGAS is a low risk buy, but be prepared to stop out if it breaks down. I like that set up (UGAZ is the play , but caution ..it is a 3x).
Here is a mini lesson:
We all have to own our own trades. Set ups can fail. I own up to the fact that even high probability set ups can fail ( Like in TWTR yesterday. It held up for quite a while in mkt weakness. I thought it was going to still do well) . Here was my Set up , buy above the 50sma. I would sell a break down of that support line, or $38 , the 10sma.
THIS IS WHY STOPS SHOULD BE HONORED and monitored. It looked good through all the market weakness, but now is succumbing to selling pressure.
Now on a daily chart above – it looks like a straight thru crash, but see the 5 minute chart. If you watched your position live, you could have sold the initial crash (High volume) or weak bounce after. A stop would have gotten you out somewhere between.
The markets are tricky, jumpy and volatile. Being stopped out at times stinks when your stock then spins around and goes higher . Ignore that emotion. At other times it protects you from a crash like OIL or Nat gas recently, and you can always redeploy funds for another trade. There is ALWAYS another trade.
Best wishes and happy trading.
~ALEX
“Ignore emotion” when stopped out. Alex, that’s wonderful advise – I wish someone had told me that years ago.
Ha Ha – I say it, but I struggle with it at times to : )
If I sell something and it takes off the next day? Get stopped out and it reverses higher : ( “Would’ve -should’ve -Could’ve Syndrome ” creeps in, but we will NEVER trade that efficiently , probably not even 1/2 the time! So its best to move forward and look for another opportunity.
For sure I have found that Emotions will hold you back, beat you down, cause fear , ‘Afraid to Trade’ despite bullish conditions in the charts , etc
I think I need a poster of that…”There is always another trade”. Keep saying it to myself but maybe not loud enough. Thanks for the great work Alex!
Thx Deshy
And if you find one of those posters , I’ll take one and a T-Shirt too 🙂
Good report Alex, I didn’t sell my small UGAZ position when it spiked, I should have.
Yes, those HUGE spikes out of lows can be a quick burst of short cover. Then price can keep flying , but they often drift down and thats what we see now. The shorts get bold again and likely start shorting Natgas, and I expect we could see a run higher if they’re wrong . I am actually looking at UNG and UGAZ for a possible entry today, ( UNG or NATGAS near the 10 & 13 sma…not UGAZ, its a 3x and moves deeper). A break of prior lows is unhealthy.
So maybe you’ll get another chance and next time it happens , you’ll sell that spike. Cudo’s for catching that initial entry anyways
Hi Alex, just a quick technical question: for your analysis do you use in general the linear or the log scales? Mainly in longer term Charts there is a substantial difference between the two types of scales. TIA
Hi Georg ( no ‘e’)
I had been taught that Linear works best for a year daily or less, over a year switch to Log. I have been in the habit of using linear in all time frames and occasionally will check both. SO I tend to use Linear, but your question is a good reminder for my longer term time frames, It definitely changes some resistance points.
Thanks
Thanks Alex. Couldn’t agree more.
You changed Ur Name , THAT is funny! : )
Hi Alex! What about silver, does it still have room to go up after todays spike? I bought some USLV yesterdy, and now wondering would it be time to take small profits or just leave it and watch what happens next week?
Arigee
EXCELLENT! I am so glad you grabbed some of that. I posted those charts ( will attach here) . as you can see – I have a higher target, but going into the weekend? A spike can always do a 2 day pullback to the low of the candle..or just blast higher. Its now tricky. I take some, but if its a small position? I ride it and if it pulls back I might add to it if conditions are right.
THAT SAID… If your position is big, I’d take some and let the rest ride. If its small, can you ride it out ups and downs or just take the gains and dont look back (Dont look back because it may just run higher fast : )
See my other chart above for marks question, I have a silver resistance target near $18.60. It could go through, but likely a pause
These comments are priceless…thank u.
Yeah, I agree…good comments by the gang! Thx Heidi
Alex-silver left for dead has moved up with a vengeance consistent with its summer 2012 run. You pointed this out in a previous report (I think you said ‘explode’) and here we are. Nicely done. I wonder if we hit the previous highs in GDX made just a few days ago, go sideways for a day and two next week (with additional short positions taken for added fuel) and then bust higher yet again next week into new highs? If the S&P turns down/reverses that would be the fuel for closing at or even past Tuesday’s intraday high later today? Cycles schmikles I say:)
Hey Mark, Yes it was this chart . i heard SO MANY people concerned about “dead silver’ and yet the internals were saying it was just a ticking time bomb.
IF I used cycles, I might be thinking that GDX was getting late and could sell off next week, however , as you said…it may go sideways. It may have put in a low 2 days ago, but I think it needs to break a trend line to be a DCL, so… GDX can go higher today/Monday and drift down to the 20sma for a dcl or go sideways. i will try to develop an idea in the weekend report, but anyone locking in gains can sleep this weekend and hope for a pullback to re-enter. GOLD?SILVER look pretty strong tho, despite the crazy strong $USD.
Looking at a 15 min looks like nice RH&S formed on both GDX and GDXJ. GDX already popped above its neck line today and GDXJ after attempting to bust through has settled (so far) on its neckline. We could have a fast advance in both when they move next week. Measured move in GDXJ as I see it 31-32. That would be consistent, Alex, with your feeling that gold wants to move to 1320 ‘and fast’.
Just an FYI: I believe markets are closed on Monday.
is that just NYSE, or is PM markets closed too?
Forex and currency mkts trade around the world and will be open Sunday night etc SPX DJIA, and NAZ etc closed.
Yeah, I didnt know that until I just heard it , In the U.S. – some here can still have fun. thanks!.
SO GOLD can trade higher with out us Monday, then pullback when we get back?? HHMMM. I hope for visa versa
hi Alex.. back here after a month of bastard flu!
Thought GDXJ was topping out today, but it appears to have just broken out of a bull flag pattern (& GDX) .
Is that how you read the chart too?
Hi S.O.G.
That flu is going around and taking its toll, hope you are all better. Not sure what time frame you mean?
I looked at a 5 day 5 minute and just GUESSING, but some people may have bought that break out a few days ago, rode it down, and are bailing out now? There is very light volume, so buyers are waiting and sellers arent heavy either. Consolidation could lead to a cup & handle in that time frame or it could sell down and fill that gap into a daily cycle low next week. Its very neutral to read right now whether next direction is break up or down. I’d have thought UP with GOLD today
ok sorry.. meant the 10min chart
Yes , that can be considered a bull flag pattern : )
Well Alex this is your time. Enjoy it. – Actually I might say ‘continue to enjoy it’
I’m hoping it has been all of “Our Time” : ) Thank You
Alex- great job as your analysis was really spot on. I personally cut my size in half as I use a lot of options but kept my core position in Gdx. I like buying dips in front of 10 day and selling the rips now. Have you reduced positions at all yet in miners?
RM,
Nice work! Options are a different game plan and you did the right thing really. My teacher used to teach ” Beware: Options are like fish, the longer you hold them, they more they can stink” : )
You asked – Have I “reduced positions”. As for me – I make my living as “trader/ investor” , so I am “IN” as I’ve been convinced of this move, but I often rotate positions. I did lighten for the “engulfing ” 3 days ago, but not much. I have also been using various moving averages too, to buy the dips /sell the rips. I misplaced a trailing stop & got stopped out of my AG position under $7 , but it worked out well, I grabbed JNUG.
I have tried watching 10 sma for some miners 8 EMA for some, and 13 sma for others.
Deeper breaks may just be dipping into a DCL, but some individual stocks (even strong ones like RIC) recently dropped to the 50sma, so they all seem to be acting in their own patterns now. I like that!
Very good line from your teacher and he is right.. Options are very tough and should be avoided unless properly educated. I will now just trade around my Gdx stock. Abx was scary and usually acts as a barometer for miners so was nice to see the big catch up bump Thursday.
That’s some great info..tx CF
Alex, I noticed one of your comments said you liked miners acting like individuals rather than a group. I also noticed this and wonder why you think this is a good thing? Thx
I’m not sure who here follows cycle and who doesnt, but in the past as a “trader” when the Miners acted individually I found that GOLD could still follow cycles ( lets just say 18-20 days to peak, 28 day DCL) yet some individual Miners would just do their own thing , so you could trade out of leaders and grab laggers despite cycle lows coming in GDX ( others would just be taking off).
I AM NOT saying that will be the case, but I am seeing signs that it may occur.
MONDAY 10 A.M. – Almost dont the weekend report. HARDEST report to write. SOOO MUCH going on and cant explain everything. Trying to figure in the important info. Thx for your patience all
Alex, any new thoughts on Nat gas? Friday afternoon hit the 50% Fib retracement of the breakout move earlier in the week. Looked good on retrace so jumped in. In the AH/pre today/tonight getting hammered. Won’t know UNG price until AM though. Idea was to add smartly on additional weakness. But if it looks like it is breaking down and move up was negated, may be best to run away with cash while one can.
One other note, UGAZ can be a real beast. There is also BOIL, 2x bull ETF for gas and KOLD 2x Bear ETF for those that like gas but don’t have quite as much decay as the 3x monsters do.