Setting Up
We didn’t really see a whole lot of change on Monday, but as mentioned in the weekend report, some areas could be setting up. Some setting up for a run higher, others setting up for a fall. To the charts…
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SPX – No follow through yet, but I am expecting higher prices soon.
$WTIC – The chart has hardly changed in the last few days.
CRB – Not much change here either. I want to mention again that the CRB is made up of many things, Energy, Grains, Metals, etc.
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GOLD – The dollar is nearing the time for it to dip into its DCL, but it is going sideways right now and Gold is dipping down a bit. Gold is still holding the 50sma and it is oversold. If the $USD dips briefly to a DCL, Gold could hang in there a bit longer.
GDX – That could happen with the Miners too. They looked weak today. They started selling off, turning green, and then giving the gains up, but this also resembles the action in late March right before a run higher. Patience is all I can recommend here. This isn’t fully oversold, so it could roll over.
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So not a whole lot has changed since the weekend report, however time heals all wounds. Why do I say that? After the recent commodity sell off, many wanted to give up trading for life! Now I am being asked to ‘find trade set ups‘ in that sector again. The weekend healed our wounds. 
Just kidding, but we do have traders here that want to trade even if it is possibly just a good short term bounce. I am being asked, ” Is this a low risk set up? ” SO I am going to cover that a bit here. Remember that things can still be volatile and shaky, so it is your choice – keep positions manageable or stay in cash and wait for a pull back in Miner.
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Since the CRB is made up of many commodities, lets take a look at STEEL and ALUMINUM.
STEEL – When I look at this chart, I see a 1-2-3-4-5 bullish run higher, and a normal pullback at 38.2%. It is now oversold, so is Steel ready to move higher? Possibly. Some steel stocks even started to look like the selling is drying up.
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I have mentioned caution and volatility lately, but STEEL actually looks like it might be completing the first leg of its run higher 1-2-3-4-5 and an a-b-c pull back. So some Steel stocks may begin to set up for a run higher.
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X (U.S. Steel) shows a 50% retrace and it is also oversold. IT also has formed a descending wedge. This could break out and run to the 50sma. It could be considered low risk with a stop below the 200sma.
ZEUS– Olympic Steel tripled and has not had much selling. I didn’t mention this one too often, because the volume was relatively low. It out performed AKS by a long shot 🙂
STLD- This has been a strong Steel stock with a small pull back. It did a shake out & recovered the 50 sma. For traders , it could be a low risk entry since it looks to have completed the pull back at the 50sma. Notice that a tight stop at the 50sma would have caused a ‘shake out’.
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ALUMINUM – This looks like a falling wedge too and it is possibly breaking out above the 200sma. Also oversold. Again, a Tight stop would have caused a shake out.
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Alcoa looks a lot like that Aluminum Chart. If Aluminum breaks higher from that falling wedge pattern, one could assume that AA is going to follow. It is offering a low risk entry for traders, but I cannot tell if it will just be a small bounce or a continuation higher at this point.
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I added to my IPI position right near Mondays open, since it tested the 50sma 2 days ago and held the 50% RSI. The MACD is bullish and volume was pretty good right from the start. It can also be bought in this area, it looks ready to break out.
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DQ – DQ is an energy stock that has remained bullish and worth keeping an eye on. I saw that volume today and almost took a position, simply because I like this set up and can keep my eye on it. It looks like it wants to run to the $32 area. It is not quite oversold and this has not dropped to the 50sma. It may not have to though, it is actually holding the 34 sma (not shown).
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CLF – After a steep sell off, it has gone sideways above the 200sma. This does NOT look like a bear flag, it is also very oversold. Today it started breaking above the 10 sma, and I like that as an entry , but will this turn higher and run or just continue to go sideways? Due to the MACD being widely gapped open and the 50sma overhead, I think it might just do what it did in March. A Pop higher for a couple of days, and then a sideways move to regain strength. That is a guess, and a trader can take the trade with a stop in place.
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So that is the market wrap and a few ideas that show a possible end to the sell off in Steel and Aluminum. It’s difficult to say whether they will just get a bit more consolidation or pop higher. The Falling Wedges often get a pop upside, but remember that we do not have a smooth uptrend in place here after that sell off. So without a little sideways move , a little base building, or some consolidation, this is more like ‘catching the falling knife with a plan’. They somewhat have a support level to rely on with the 200sma, wedges forming, and other technical ideas.
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Excellent report Alex!! “What kind of trader are you?”… that is great. I think a lot of people don’t really know the answer to something so simple. Maybe some (me included) , try to force trading frequently because they think that the money is made in quick in and out moves. That might work for some. But if that doesn’t support your personal emotional state, and it isn’t making you big money either, why not go to a longer term horizon? I did, and it works perfect for me. Don’t be afraid to NOT trade. I think it’s a helluva lot healthier, and may actually make you more money! Have a great day boss man, and everyone else as well…. 🙂
BTW Alex, when you talk about being stopped out of a position on a tight stop below the 50, although we pay close attention to that 50 sma, it is of course just a reference point in the chart. For me, if price were to break below the 50, per se, but the 100 sma is close beneath, I leave it alone. As long as price is above longer term ma’s, and price is not too far, you can leave the position alone. I use 50, 100, 150, &200 daily sma, Just for reference. But focus mainly on the first 3. Pair that with CCI, and set it to 50 or 100. A break below the center line in CCI would be a confirmed break of the ma. That will give you some whipsaws, but the longer your ma, the less whipsaws. The 100 sma works real nice in that combo. So does the 50, but with more signals. At least this is something that acts in real time, as opposed to lagging like MACD and Stoch, etc.. This basically keeps you on the right side of the trend, without having to adjust much.
Yes, I wasn’t referring to myself. I am referring to readers comments. They use hard stops to the penny at the 50sma , so I point out that if you look at the chart, price broke the 50sma and you would have had a shake out if your stop was tight with no wiggle room. I mention it as a teaching point, so going forward others can see that ” a tight stop wont work with this’.
Your comment above can help others if they are in front of the screen (many arent)
I personally have my own methods that I use, and it varies with the stock that I am working with. Most of my stops are mental stops and I monitor trades through out the day.
Peter, CCI?
If you go to
http://stockcharts.com/h-sc/ui
– it is under the ‘indicators’
Could you just say what it stands for? The could google it.
refresh
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Thanks
I dont know if tradingview has it Bill. It’s available in stockcharts. It is pre-set to 20, but I think that’s more for active traders. I use 2, one set to 50, and another at 100.
“What kind of trader are you?”
It’s a good question to ask, because I think at times , people dont realize by their own actions, that they are not the type of trader that they say they are. Why do I say that?
I read a lot of emails. I see people say that they are “long term investors, ready to invest in the commodity / Precious metals bull market.” And that is good, but then they mention how they bought XXXX Monday and sold Monday afternoon. Bought QQQ last Friday and took profit today. Bought Vale last week, but didnt want to hold over the weekend. Buying CLF, but wont hold through the Fed.” and so on.
I think people should go to their trading account and look at the trades logged in for a month. Are they really acting like a long term buy & hold investors? A long term investor doesnt care about the wiggles, he will say ” I think Metals or precious metals has resumed the Bull status, I’m buying and holding for 2 years, not trading the wiggles.. : )
You can be both long term and short term with separate accounts or a core, as long as you know the difference.
I think you are spot on in this one. Most people come to CF, for example, looking to follow a person whose system works. Problem with that is, that system may work for you, Rob. Alexander, but may not be the best system to follow for me, per se, or at least not in lock step with what you. If I know I am not comfortable with trading in and out quickly because of time, work, etc.., then why do it? Doesn’t mean I can’t look to you for guidance in your general view of markets, cycles, etc., but I can adjust my style to align with your general view and we both live happy!! And I’ve tried trading like you, but I can’t do it! Every time I’ve tried, i’ve ended up with a loss. But thats how I’ve learned to make this work. I follow you, but put my money to work my way, in a system that I’m comfortable with. It’s taken me a long time to find “my system”, which, btw, is about as simple as you can make investing. If you’re not comfortable buying a .50 cent stock, then you dont do it. Find something else in the sector. Bottom line is, you have to find out what style works for you the hard way. You take losses in the process, but if you really want this, you’ll keep at it, and you’ll find a trading or investing style that feels right for you. 🙂
I’m working on it.Unfortunately, I am still in the School of Hard Knocks! LOL
We all are Nancy!!! You know why people get addicted to trading? Because they can’t understand how they can be succesful at other endeavours, yet not be able to master the market. So they keep at it, and it becomes an “addictive challenge”. I’m guilty of some of that. Find your system, and stick with it.
I really view it as gambling…with better prospects than most other types. That is one thing I am learning about myself…I like it! LOL. One problem for me is that I am still working sometimes. When I started with Alex, I knew I wouldn’t have any projects for awhile an was planning on semi-retiring…but then several really fun challenging projects came up that I couldn’t refuse. But now I can’t be here to monitor things as much.
When set ups after pull backs present themselves ( Like Miners did in January and Commodities did) You dont need to be a trader daily.
Those runs lasted weeks, we made strong gains from Mid january through March, and locked them in on the way up. We then grabbed commodities and made gains.
That will happen again.
Everyone is looking at recent volatility and thinking that they will always have to deal with it, but look at long term charts ( Use miners for example, like CDE, EXK, PAAS, etc ). You get a run higher, a consolidation, a run higher, a consolidation.
Learn to avoid the volatility at the start of selling & consolidation. if you are working, wait for the end of the consolidation and the run higher. It takes patience, its about timing ( ICL or DCL entry).
its a skill, it’s an art form, and that is what I try to teach.
Two thumbs up!
If you are busy with other things, then lengthen your time horizon. Go out to 100 or 150 day sma, although I think you can still work around the 50 sma even if you are extremely busy. But do what I do, be a position trader. Your time to buy or sell should be mostly based on closing prices, so why spend all day looking at it? Buy or sell according to price near the close, and hold for days, weeks, months. As long as it’s going in the direction you thought it would.
Like Golf
You made some observations back awhile ago about state of mind too. I think that is important. How badly does the inevitable downswing effect you? Can you stand red? We all know how the green makes us feel! Balance is important. It also effects my artwork so I am evaluating that too. I’ll find my way.
Thats where this gets tricky. We want this to work so much, that we let it get personal. We kinda have to be like a computer, no emotion, which is tough when your hard earned money is on the line! You can’t let it interfere with your painting, which is easier said than done, but I think you can do it. Sometimes I make a mistake that costs me pretty good money, and the last thing I feel like doing is smiling, but then I get home, and my kids jump on me expecting a happy smile, and I have to forget about the money completely and just be happy WITH them. Inside it breaks you, but you have to find a place inside of you where you can just put it there and come back to it later, without it interfering in the little things that are the big things. 😉
so thats what ‘HK’ initials stood for!
Ha! Good spotting!
Good report Alex. If Steel and Aluminum are perking up, then can copper and gold be far behind? I can’t see a miner sell off with X and AA moving higher. Just a hunch no historical data to back that up.
Tough call- maybe it has to do with cycles varying.
Looking at the charts, they all ( Steel Aluminum, X, CLF, etc ) bottom mid January.
I do show GOLD & GDX down in pre-market, while CLF, X, etc are up.
CLF, X, VALE, etc sold off 50% , while Miners have not. there does seem to have been a slight disconnect recently
AA moving higher nicely. Looks real good
AA CENX ZEUS STLD mentioned in thge report, green
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Also mentioned CLF, I took a small starter position…RED 🙂
I really wanted STLD when charting last night, dont know why I was drawn to CLF .
Watching the same thing here. I’d like to see base metals de-couple from precious for a few weeks.
Good morning everyone:) This could be the reason why CLF started moving yesterday:
Cliffs Announces Agreements with Minnesota Power
Cliffs Announces Agreements with Minnesota Power
PR Newswire
CLEVELAND, May 24, 2016
CLEVELAND, May 24, 2016 /PRNewswire/ — Cliffs Natural Resources Inc. (NYSE: CLF) announced today that through its subsidiaries it has entered into multiple agreements with Minnesota Power, a utility division of ALLETE Inc. (NYSE: ALE). Cliffs will receive $31 million dollars in cash as part of a long-term purchased power arrangement for its Northshore operation with Minnesota Power through 2031. The agreements, pending potential regulatory approval of the sale of utility assets, include certain non-core operations; transmission assets at United Taconite; certain land options at United Taconite and Northshore Mining Company; and transportation rights along the Cliffs Erie rail assets. Separately, Cliffs has extended its regulated power arrangements with Minnesota Power for 10 years at its United Taconite and Babbitt facilities.
Lourenco Goncalves, Cliffs’ Chairman, President and CEO, said, “I am very pleased that we solidified a strategic relationship with Minnesota Power for long-term, low cost power which helps us preserve our future competitiveness. Importantly, the signing of these new agreements will provide Cliffs with considerable certainty in our energy management for these operations, and will also enable us to continue to improve our cash production costs over the long-term.”
Thanks so much, I was just looking.
Hecla Mining bought MGN
MGN up 40%
BCEI breakdown nearly 18%.. the red mist descending again on energy.
Yup, and as you mentioned yesterday BBEP has now almost tripled in days. Wres has doubled in 3 days.
Crazy volatile
think its safe to say, a lot of those mega rallies in March were the C legs of the main (bear market) wave 4.
many have found wave 5 crash lows since then.
need to remember those pattern appearances for future reference…
I looked at the BCEI chart. it would have looked complete, right? 1-2-3-4-5 would look like it was there , now it could extend? Often I cant trust what I see as the E.W. counts…………. ‘until later’ 🙂
BCEI looked more complete at that stage than BBEP.
its usually hard to tell whether those big rallies are a new (1) or only a (4)
I said BAS next. Was wrong, it was Bonanza. Did anyone read the transcript? They basically got a margin call. They changed the debt on them last night. I am done with this energy stuff, man. People changing the rules, oil going up good but small caps are just exploding in a minefield right now.
I’ve been watching Solars for the past few days and they are starting to show signs of health
SOL, SCTY, JKS, TSL, VSLR, WNDW
WNDW What a beautiful chart! OTC though. VSLR looks nice.
Is BAC just moving higher in a parralel channel or is that a bear flag?
I dont see a bear flag, do you mean like on a 1 yr wkly?
I dont see one on a daily
On the daily!
https://www.tradingview.com/chart/BAC/cgvwhPL4-BAC/
yes, Thats too long to be a bear flag in my opinion . Its almost as long as the leg down was.
It doesn’t mean that it cannot drop, just that to me it doesn’t have a bear flag cautionary flag waving
Thanks Boss!
Oeps, (there we go) you are a good teacher.
Thanks,
CLF gapped open and closed the gap. Bought it on a tag of the 10 sma & reversal for a trade
I am with ya on this one ! 🙂
Risk reward is excellent.
Sorry Guys, I had to run out at 11 a.m. – just got back.
trying to look things over ( though I did check the MKTS out on my phone a few times).
Tech and healthcare are running away with it this week. Maybe the QQQ’s are the trade right now and we can leave commodities buried in the dirt a little longer?!?
I bought X and CLF. Buyers remorse so far! But, I think we make money long term.
I’ve owned both for a few days and I agree with your belief that our patience will be rewarded.
I have some call option Jan.2017
Guert, how much were they? I never play options that far out. But maybe I should, sometimes I get the price right but the time frame too short so I still lose! Thanks.
Steel…. X Call Jan. 17 18.00 were 1.30
Time enough and there is a gap @ 18.00 will be probably filled.
Hope this helps Cason.
Thanks. I kinda started crapping out with options so I took a break. I was over-trading, had to really re-analyze my methods. Might try a paper trade with this one just to see how it goes. I picked actual X shares today.
SAME! Just got X today so too early to know if I hate myself yet or not.
VALE keeps finding support at the 2015 September low…. bounced off that level a few times last few days…
Any thoughts on CHK? It looks to be bouncing off support while breaking out of a falling wedge…
Hey Dave
CHK looks good , as you mentioned, but it kind of looks like CLF too. I bought that and it ended up lack luster, so just keep an eye on it if you own it or enter it .
Alex, others, thoughts on OLED? Fundamentally is this a good business to be in long term?
DUST above the 20sma first time since January
Do you think still keep DUST Bill ???
Thanks my friend.
Geurt, I own a small amount of DUST and I won’t be selling soon. Set your stop at break even and don’t worry about it.
THANKS BILL….. Let me know when you “think” you sell it.
Yes…. when break even I WILL get out.
was just realising myself, that GDXJ broke below my 4H 65eMA for first time in nearly 4 months also
yeah…. wow…
Cason can now hopefully stop ‘dying a little inside, every time the miners go higher’
LoL.. its time to come alive again Cas!
Ha! I’ve been waiting a long time for this!
I sold my JDST today. Last time this blasted down and I didn’t sell immediately, it didn’t go well.
SOG, was thinking about you when I stopped out of EVERYTHING last week to see it all and higher. Love selling those bottoms! (idk, commodities really didn’t look that hot today).
Picked up some JDST this morning. This is what I drew up. I’ll probably get out quick as I don’t like 3x positions.
https://www.tradingview.com/chart/GDXJ/iFryF1UW-GDXJ/
Good trade, don’t get nervous, You are already up 12% so put your stop at break even and let it ride.
I exited JDST just before close today, but I was already in. First time GDX/J closed below lower BB since the waterfall in fall 2015.
I actually bought some GDXJ for a quick counter counter-trend trade. 😛 I do not recommend anyone else try, this is going to be a very quick trade.
XCO up 68%! They got hammered big time recently and now this.
Couldn’t go much lower!
Wow – That has been a crazy stock. I wouldnt touch that or others moving like that for a while.
TQQQ and TNA having nice days.
AUMN down 60% off the highs
Once the pullback is over and we show some patience and buy solid companies we will be richly rewarded as CS mentioned many times. I missed the boat when both AUMN and GSS went from like 16 cents to over a buck. Sitting on cash and ready to load when boat once given the go!
CF? I assume! Which companies do you like?
Yes, CF 🙂 I like whatever CF likes. I am putting together a list and then researching stability. I owned CDE at one point and it went through the roof (I opted out before it’s highest point though). This is the list I watch. I need to add or remove some as time goes on.
RIC,NG,BAA,TGD,VGZ,AUMN,GSS,MGN,MGH,MUX,EXK,NAK,FSM,PPP,PZG,CDE,GPL,HBM,FCX,TGB,NCQ
Big list. Hard to manage if you owned them all. I was looking at fundamentals at the bottom. It looked like TAHO, GOLD, and RIC were all making profits. I do like MUX
No, I only manage 2-3 positions at any one time. Currently I am 100% cash and just window shopping. But when the time comes, and it will, we will know it! I don’t want any cash tied up so as to miss great buying opportunities. I guess right now I am not making money but also not losing money either. My problem has always been patience like I needed to own something all the time. I guess i do own EXTR (Restricted Stock) ~ the company I work for and the stock has been rising. Nice that they gave some penny stock and many of us got options but at $5.30 so those are worthless.
I know the felling of always wanting to be invested. I’m about 30% cash now. I bought some items Today.
FOMO 😉
*happens to the best of us…
For me its not FOMO, its more about trying to make money after losing money. MMALM
TAAT
>>That is how they come! 😉
And hopefully refine it to …” Just making some money ” 🙂
Thats a good list
(You can remove MGN – Got bought today). 🙂
How about MGN getting bought instead of just going bankrupt like energy companies. Yeah for miners!
AUY, MUX, SA?!?
Add KGC
Some NICE selling today in some Miners, and that is added on to some other milder selling. NICE! Finally.
GSS , MUX, AXU, AU, DRD, etc coming down from those highs.
FINALLY!! Agh!!!
Thanks for mentioning it Bill!! Saw your comment and looked it up in the chart. Liked where it’s sitting, right on the long term ma’s. Bought me some. Off its highs enough for me.
Follow up from yesterdays post about cycles..Alex, so what criteria have to be met to determine if it is in fact the DCL and not just a mild correction, or what criteria determines and ICL? A low below a trend or prior low? For example, your DCL on the nat gas chart above in april was preceded by a small peak and correction in April which was even a lower low than your DCL in April? What do use to determine what and which are cycle lows? And why is April the DCL and not March? Thanks for the time on this also btw,
Sorry Miller, I dont always come back at night and read here, I have to review the markets, sectors, stocks, gather charts, etc for the next report, and that is usually after spending time with family.
So tere are many things to look for. A trend line break on the pull back, ‘timing’ of the cycle as it gets late, a break back above the 10sma on a bounce , and so on.
So basically I wasnt really trying to teach everything I know about Cycles and technical analysis ( That would take so much time, there are often many exceptions to the rule ) , but to show why entering a 3rd daily cycle or 4th daily cycle with trades is best to keep positions small and hold cash…and not to go ‘all in’ especially as we get close to the timing for it to drop into a dcl or ICL..
When an ICL comes , and I always let people know when that is if it’s a sector that shows promise, I go ALL in, you can use leverage, etc and the odds are stacked in your favor. The only trouble if you catch a proper ICL is that it can also bounce around and go sideways at times, before lift off. That can be troublesome in leverage.
I hope that helps.,
meanwhile oil just touched a new high for the cycle – up the wall of worry
5.1M draw reported by API. If EIA data is also that strong, could get a nice move tomorrow. BCEI could be up an entire nickel!
Bought X, sold JDST and flipped into GDXJ (short term), holding some LABU but wish it was more. CLF. Heavy cash, but wishing I had some QQQs.
XLF is looking good. So are the FANGS if SnP is beginning dc. Bio techs too, but they’they’re getting a little more extended.
As far as commodities go, I’m waiting for miners to show signs of bottoming. Watching sentiment closely over the next few weeks in the metals.