Mary, Mary, Quite Contrary, How…?

Even in the toughest of environments, we see seedlings take root and blossoms shoot up. We also see the same thing happen in the toughest environment in the markets.   At the time it may seem quite contrary, but this is also how bear markets can turn into Bulls.  Are we seeing that now?  lets look at some charts…

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Starting with the SPX. We have expected this rally , but will it lead to new highs, or will it roll over?

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I think that this move is just starting and it can last for a couple of weeks.   Notice how the Rally in October didn’t lead to new highs and broke down to lower lows. We have lower highs and lower lows in the markets now. I have drawn in several resistance points and we will see how the markets react as time goes on. This is NOT near a point that I would short it.  I would remain long,  maybe lighten up in a week or so. The BLUE BOX is an idea of what we may see.

We will obviously discuss what’s unfolding as time goes on, but take a look at this…

IWM –  In October the IWM shot right up and when it got to the 50sma,, it kind of meandered along. If we start going sideways, there will be signs showing whether it is a consolidation readying to break higher, or drop. 

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TRAN –   I pointed out yesterday that the TRAN did NOT double bottom like the SPX, QQQ, DJIA, etc.   It seems to be leading  ( it did lead us down too).  Would it stall here at the 50sma? 

TRAN – The $Tran actually  broke above the 50sma.  It did get above the 50sma out of the Sept lows too.  I re-drew the resistance for the next possible test,  and the 200sma is quite a bit higher near 7950 . 

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WTIC –  In the last couple of reports I mentioned that the XLE is not breaking down and that I think OIL may be bottoming.  My Nov price target was hit in the low $26 area.   This is a bullish set up the way I look at things.  A move over $33.36 put Oil over the 50sma for the first time since early November.

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I mentioned CJES and WTI as possible set ups in recent reports.  Energy stocks can easily jump 20% per day,  but I still need to warn readers of the dangers in some of these companies. Some have pretty heavy debt and may actually go under in time.  A long term  BUY & HOLD may not be beneficial for some Energy companies.  Trading a small basket, and small only positions for now, may work best as these base out or break free from bases.

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XLE– This is what I was pointing out recently as oil broke down. This is bullish. Yesterdays report pointed out XOM, CVX, and there are many more that are suddenly showing strength. 

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CJES from yesterday-  a higher low when Oil broke down.  You can see that a run to Dec highs is a ‘quadruple’ from the lows.  This also could be a huge base. If it recovers, that weekly chart would be pretty bullish looking.

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GOLD, MINERS

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I have wanted to show different types of consolidation during this phase of the precious metals run.  I showed in a past report  the idea of  ‘The Melt Up’.  That’s a minimal pull back, where price only drops  to the 8 ema and the run gets overly extended.  I used this to show why it might be best to sell a portion of our positions and let the rest ride.   I also have shown what a Deeper pullback looks like,  to keep us alert to the idea that we can get a 50% pull back and it would be normal.

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Now I want to show another Bullish side to the current set up.  Not to confuse anyone, I think that we should EXPECT A DEEPER PULL BACK, but if the possibilities are there for a more bullish outcome,  it is best to see it ahead of time to know what to look for.

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GOLD – Reminder that a pull back to $1180 or even $1154 is a NORMAL  38% or 50%  retrace.

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Gold –  Again I want us to expect a drop,  but we have all seen FLAGS form in bullish set ups too.  We could get a multi day flag here.    The Blue Box is a more likely scenario for getting back to oversold. That would include  a bounce here and a drop to 1180.

Now look at this round bottom that started as a triangle,  similar to Golds base.   It ran up, went sideways for 1 month,  and then continued higher. We could just go sideways for a week or 2 to put in a stealth DCL. 

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GDX –  This is where it gets really interesting.  Look at ABX and NEM and they had a complex base just like GDX.   They ran up  and formed a cup,  just about reaching the top of the left side.   GDX would be about 1/2 way there, at a resistance point to the left where the arrow is.  Could  it just flag and move higher?  We cant tell, but…

..But these type of complex bottoms often rally in that melt up fashion, leaving the majority behind.  This is why I say that I am still trading laggers with bullish set ups.  I dont want to be all cash, when there’s  a sector that has been hot and isn’t pulling back much (yet).  I  still Use stops. Traders should be in front of a screen to monitor positions & Stay Frosty.

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This is an example of a complex bottom just like GDX now.  It paused for 9 days  (2 wks) 1/2 way to the top, and then took off to new highs.  Scroll back to the GDX chart above , then back to this one.  Similar so far.

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So I am NOT saying that we are flagging.  I am showing all possibilities, and I do see some Miners that still look like they may want to break out higher.  So we need more time in Precious metals to know how this will unfold.

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  An example of a trade set up was found in  TRQ,  as mentioned in the comments Wednesday.

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Notice that in January I pointed out the pinch with TGD in this pattern. TRQ is similar now. It is a pattern that I watch  and buy under the right conditions,  with a tight stop.  TGD doubled from here.

TRQ looks set up to  break out.  If it drops , I get stopped out.

SO the markets look set up to continue higher / sideways for possibly a couple more weeks. That could pressure Metals and Miners a bit. So far they have just moved sideways, but often they do that at tops before dropping into the DCL too.   I do believe that  buying opportunity is coming again in Miners.  Oil looks to have bottomed for now too.

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I want to release this report at 7: 20 a.m., and then I will add a few charts of the type of  set ups that I look for as a trader. I will post in the comments section below the report when I have added some trade ideas.   These trades are the type that can move big in both directions, so they may need close watching. Know what type of a trader you are. Thanks for being here and happy trading. 

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~ALEX

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On Wednesday I was watching some Energy companies setting up nicely.  Some have double bottoms with a higher low  ( like the XLE), other held up strongly and formed bases like these 2 that I pointed out yesterdays report. Some of these that bottomed  months ago may be Buy & Hold now if the lows are in for Oil.

I dont want to get too crazy, but the potential in many of these Energy stocks is massive if Oil has bottomed and they return to former highs.  Recently many trade ideas popped up in Energy stocks. I looked at AXAS, EOX, CRK, PDS, SGY, BCEI, ERF, SWN, LNG, ECA, CPG, OAS, etc., and found good looking set ups.    I will mark up a couple of charts so you know what to look for.  ALSO do not forget the commodity stocks that I have been mentioning   ( VALE, FCX, AA, AKS, X, STLD, CENX, etc), they are acting correctly too.

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BCEI – This is a double bottom with a higher low. It could be bought with a stop below recent lows. I just want to point out on the first 2 chart the crazy potential with some of these Energy stocks returned to former price .  800-900% from lows to Dec highs.

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SWN – This stock bottomed and doubled already.  It is consolidating above the 50sma. Look at the potential if this puts in a large round bottom.

CPG –  I also look at the weekly charts, and here we see a break from the down trend. On a daily chart it just broke above the 50sma.

OAS – This looks to be shaping up too. The daily chart  shows the set up,  the weekly chart shows crazy potential if these get moving higher.

OAS WKLY

So if you are a trader, you want to check your energy list and see what you can find for higher lows, divergence, etc.  These may have great gains in the longer run too, if they avoid financial problems and Oil has bottomed.   I do want to mention here that until we know whether or not Oil has put in temporary lows or The Lows,  we need to remain defensive.  ALWAYS USE AND HONOR STOPS.  I will occasionally get an email from someone who tells me that they   “…bought  XXXX  at $16 and it is now $6, what should I do now? Add to it? Sell it? “.   That happens when one doesnt use stops.     That is a sad situation, and it is not one that I can answer.  Please trade these with a willingness to sell if they go below your purchase price. I believe that we will have huge opportunities in the future in Miners and Energy,  but you need funds to take advantage of those bigger moves.  Months from now we want to have some good  ‘Gains”,  not be thankful that we are finally back at “break even” .