Waiting For A Sign

Patience in the markets can be rewarding and it might come in various forms.  Patience is often needed to wait for a pull back to turn into a buying opportunity or a trade set up.  It also might come when we are holding positions and we are waiting for price to show follow through.  This weekends report showed mixed signals in various sectors and Monday started clarifying a few things, but a little more time might be needed to truly see what is unfolding.  lets review…

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SPX -The general markets showed some upside potential, regaining the 50sma.  It looked like the DCL came 7 days ago,  so now we need to see some follow through to new highs to avoid having this become left translated and a repeat of last fall.

NASDAQ –  Of course, some of the charts from the weekend report pointed out lagging weakness, and really need to improve to look less bearish.  The NAZ has overhead resistance as shown.

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WTIC –  This chart is not an accurate view of Mondays Oil rush, but it’ll do. Oil continued higher , up 3% at one point, but I dont think that it went to $48.61. The volume on the chart also looks wrong.  I am holding some energy stocks and they did offer some gains.

NATGAS –  Natgas dropped and the MACD crossed. It could be dropping to its DCL. We’ll see if the 50sma offers support. This would then be the 3rd daily cycle, and could be weaker,  so I would think that the 200sma will continue to cap the price. 

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Gold broke out Monday morning and quickly reversed , giving us a false break out. If Gold continues downward,  the high of this daily cycle came on May 2, and this would be left translated. Patience has been a killer on waiting for Golds next pull back. 

GDX – When Gold ran up to $1290 and swiftly dropped to $1275, that was a $15 drop, and Miners didn’t really sell off like they used to.  There are signs of weakening in this chart, so if Gold drops, we may finally get a buy-able pullback in Miners, but this is just a nice trend higher so far. 

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SO I want to move on and discuss some set ups,  some reasons to be cautious, etc.  I’ll start with Aluminum, since it can affect AA, CENX,  and other aluminum stocks.

ALUMINUM – This is a bullish falling wedge sitting on the 200sma.  I would expect a rally from this if it breaks higher.  Look at the current MACD,  it is ugly, so I will be watching how this unfolds. It may become a sell on the move higher,   or it can just correct itself like we saw in all of these in January. All MACDs were ugly in January, all MACDs are ugly at steep sell off  lows. Read the chart.

So lets look at AA –  It is also sitting on support and shows a similar wedge ( not drawn in).  I expect a move higher , but look at the move out of Januarys lows. It took a little sideways time to correct that MACD.  By watching the moves in AA, CENX, X, AKS, FCX, HBM, etc etc –  we can get an idea of what kind of recovery or bounce  is ahead.

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ALSO I like to review the moves out of the 2008 sell off lows.

1. After the run from March to May highs, the drop felt steep.

2. It then bounced around and took off to new highs into June.

3.  Then another steep sell off into July Lows. Look at JULY.  The drop dipped below the 200 & 50sma and must have looked Horrible.  What would you have been thinking if you owned this then? That MACD broke down and got ugly too in July.  And then it went sideways for a week and took off adding 50% again.

I like to review these recoveries from 2008,  because I feel that we are in a similar situation.  I dont want to give back gains when we make them on strong runs, and I also dont want to lose sight of the bigger picture and miss out of future gains.   That is what the Theme Pic says that Patience  is bitter, but the fruit is sweet.  We have already tasted that fruitage. There will be more set ups and more moves higher over time. 

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Side note: I want to remind everyone here,  the best trades are found at ICLs.  You can use leverage at ICLs and at the following DCL.  Buying later in a second daily cycle or third daily cycle is usually volatile. It may be best to  take smaller positions.  It may be best to think of a quick trade, selling  some as it moves higher.  It is not a time for leverage and going ‘all in’.   If you are owning a core position, pull backs can be a good time to add. 

So while being cautious , lets look at some interesting set ups for traders.

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MEMP – You may recall that I pointed out how I had been playing this in the past. Buy the low, sell the run. I wrote that if it drops to $2 , its a buy.

MEMP has been at $2 for a couple of days and now a reversal popped up.   $2 to $3 is a good trade.

CLNE –  I own this and it has been a tad boring the past few days, but this still looks good  above the 50sma.  My mental stop is a bit below the 50sma. I’m not worried that it is overbought.

HAL – Oversold and holding support again. 

I pointed out CWEI days ago at the $15 area.  I love this stock so far.  The lows of the past several days was $15.     I watched it run from $6 to $20+ and the chart hardly looks like it tripled. The upside potential could be $60+.

CWEI –  3 days later it went from $15 to $23 Monday. I hope someone else took this one.  This now looks like an Inverse H&S break out.If it does a back test in the future it could offer another buying opportunity.

BCEI – I have talked about this one and its weekly chart for quite a while. I added on this dip. I may sell a partial if it gets to the 200sma with light volume.

MDR –  I mentioned MDR a while ago, if you own it,  it is becoming a sell soon, in my opinion.

WPX – Mentioned long ago near $4 and again near $6.  Still acting correctly, the drop from $10.25 to $8.00 was normal. Notice the WPX rides the 20sma, so it has remained strong. 

CLR – This is a strong run, and I just wanted to point out that even the strong running stocks have corrections  that can seem steep.  $40 to $34 may have seemed scary if you owned it.  This also has been a buy at the 20sma.

TCK –  TCK has pulled back to a potential buy spot and is oversold, so it could be bought as a trade from here. I should have drawn TCK with a 34 MA –  and it is a buy right now for a trade. USE A 34 SMA.

WRN – This copper stock doesn’t seem to care what Copper does.  It remains bullish and has put in a bullish consolidation. Possibly bull flagging.

Here are a few SHIPPERS setting up. The Shippers have been very volatile around earnings release,  so if you take a trade here, please do due diligence.

ATW-

HERO – Got crushed in mid April and now has double bottomed with a higher low.  This is a bit tricky looking and only for the nimble.  It was up 22% Monday.

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Finally  HBM –  A Copper / Gold Mining company. I still own it . Does this do a shake out at the 50sma on pull backs? So far, yes.    It took off at the open Monday and was up over 13% , but then started to sell off,  closing up 6%.   So that leaves a weak reversal type candle, but I’ve pointed out that it has done that before at lows right before a rally.  Volume today was strong.

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I know that this is a lot to digest, but I am NOT saying to Buy all of these.  What I am really doing is trying to show a well rounded view of Commodities and Energy.  Most have pulled back now and are around some type of support. Some have been very bullish all along, others have shown a deeper pull back this time around.  At this point, they are still valid trade set ups, but being this late in intermediate cycles,  the follow through can be weaker.   An ICL should be closing in for  Commodities and Precious Metals into the summer.  Oil can go for 6-8 Months from ICL to ICL,  so Oil and Energy may just try to keep working higher.  Oil may pause or just break through the $50 area.  Time will tell.

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That said, some may want to be patient and  watch what the Miners do when gold dips down. Gold is due for an ICL.  I cant imagine it being all that mild, so what will Miners do when Gold finally dips down?  Miners may set up low risk again too.   Please keep in mind that being this late into an Intermediate Cycle, upside may be limited and sideways moves may occur, so positions should be smaller, trades may be quicker, leverage buy & hold positions are dangerous,  etc.  Lets see if we get some follow through on Tuesday.

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~ALEX

TCK –  This one shows TCK at the 34 ma.  It is a buy with a stop below $9.00. Please notice how this moves day to day.  It has great potential, but not for the trader looking for a smooth ride. The dips from the blue line are deep.