Back Up Plans

We have a good amount of volatility shaking things up, so we want to have a plan and a back up plan. Lets review…

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SPX – I think we finally may have a low in place.  On Spet 2 –  I pointed out that on tht dip to the 50sma, the RSI remained bullish.  At least it is a low risk trade with a stop below the 50sma ( for those that take a trade in SPY, QQQ, Upro, TQQQ, etc ).

SPX Sept 6–  We still need follow through, so it remains rather low risk from here, with a stop below the 50sma. 

USD –  I pointed out last week that the USD  was rejected at the 200sma, and lost the 50sma.

Friday the USD put in what looked like a serious reversal with the Jobs report, but it dropped quickly Tuesday. This boosted Gold very nicely. Please read the chart, so that we dont get TOOO Excited about a 1 day drop yet. Prior 1 day drops had slight follow through. 

WTIC – Oil has been volatile and tricky.  As it drops and looks weak,  Energy stocks have remained bullish. This may be hinting at the idea that Oil is doing a 1/2 cycle dip and not getting caught up in a sell off.  The nice strong push higher today really only back tested a trend line.  We need follow through and a move above $47 would build confidence.

REMINDER: Recall that I used this chart to show how OIL got choppy in the last run from $35 to $73 (Green box). 

XLE –  Again, Oil / Energy stocks did well. This remains bullishly aligned and is breaking higher. See AREX, WPX, PGH, RICE, etc.

NATTY , on the other hand,  looks to be weakening.  This looked promising, but now looks like it is breaking down. If I was long, I would have stopped out today( But I own CHK and it was higher again, so I am holding it for now).

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GOLD & MINERS

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This is where we have uncertainty. GOLD & MINERS broke below their last DCLs. This signals failure and usually lower prices ahead eventually leading to an ICL.  Timing wise, it is very early for an ICL, but Miners looked as if they dropped into one.  I have never seen one shorter than 4 months though, and it has been 3 since the last one.  I continue to recommend caution, but At this time, many Miners do have good looking set ups.  Using technical analysis, I would be BUYING and playing this trade as it unfolds. Period.  In fact, I mentioned that I bought last week, but the 3 day weekend made it tough for some to buy & hold confidently. Lets look at the charts and discuss some possibilities.   If you want to trade this move in Miners, you will need to stay sharp until what is taking place becomes clear. Buying now after a few gaps open out of the lows is tricky, some may want to wait for a pull back, but there is no guarantee that there will be one yet.  Lets discuss.

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REVIEW: 

GOLD – Friday morning pre-market report, I said we were due and ready for a DCL with day 30 behind us. This was my chart. Any dip from here wouldn’t last long, this reversal is likely it if the Jobs report pushes it higher. Look for a possible swing low after Jobs Report.

I also used this chart and mentioned that my Signals triggered a buy in GDX, GDXJ and several Miners Thursday Sept 1.  You could buy Friday, but needed to be aware that a 3 day weekend in the US means your trade is locked in until Tuesday. Friday fulfilled this confirmation.

I showed EXK  ( and a few others) that were going to trigger as a buy on Friday as well.  They could be bought semi -low risk, with a stop at the lows, but the problem was that we were heading into a 3 day weekend, and many may be concerned about Buying & Holding over that weekend.

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THAT LEADS US TO MONDAY AS A HOLIDAY, TUESDAYs  follow through.  Another gap open. That made it a lot harder than if we got a 1 day pull back and gap fill . Now what? Lets continue…

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GOLD – Last Friday Gold put in a swing low after the Jobs report, and closed at the 10sma. Today had good follow through and regained the 50sma  This is a dcl, and looks bullish in many ways. It CAN still peak and roll over after 8-12 days. This shows Tuesday as DAY 2. Remembering that this peaked in Early July, so remains L.T. as an intermediate cycle so far.  If this breaks above the July  highs, That changes everything.   Look at Miners…

GDX –  Also had follow through, a strong move out of the lows.  Is this a bull horn/ megaphone pattern?  I fiind that Triangles and Megaphone patterns alter cycles and the way they play out.  Now,  do you see many problems?  2 big Gaps. What if you wanted to buy for a trade and maybe more?  Will they fill? Should I wait and buy a gap fill?  Where do I put my stop if I am already in and think the gaps will fill? If I didn’t buy, do I just buy now or wait for a gap fill?  Will this fill the megaphone with new highs, or roll over before that because it was L.T.? etc etc etc 

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For those that want to trade this: I think that MINERS ( Or GDX here)  MIGHT drop and tag the 10sma and fill the last gap.  I would buy that as a low risk buy with a reasonable stop, but we are still early in the daily cycle, so allow it to meander. The strong move in April did what I am talking about. The move in May did it later.

I cannot know those answers about gaps filling and so on.  I often take a small starter position and if it drops, I can add. Each trader must know his or own pain / risk tolerance. We could be ready to just rally higher for a few days, or it could be a false rally that rolls over into an ICL.  I posted this possibility below back in Aug.  It COULD still happen.  Anyone buying this move needs to use mental or physical stops.   But some are asking,  ” COULD a drop like I drew below really happen after such a strong rally out of lows?” 

Yes.  In the start of the Bull rally out of the 2008 lows, a Strong rally out of the lows, did not mean that we got a straight up  ‘runaway move’ in 2009.  Using this older chart,  Just read the BLUE ARROWS and WRITING for this example of the HUI moving sharply for 3 days or more out of lows, and then look how it acted days later.  A strong push out of lows does not guarantee a strong rally will continue.

 

GDX –  I also found these rallies that came after a failed dcl.  The rally looked good, but then rolled over.  This is to show that the rally can weaken, just to keep the hairs on the back of your neck up. GDX ran to the 50 sma & dies, but I should note that that was in the bear mrket.

 

Also look at this example in 2009-2010.  This was in the Bull market.  Look at the steeeeep sell off after a bull run, then the solid rally from $414 to $475 , and drop to another steeeeep sell off to $350. Again in 2011. These markets can shake things up, those rallies were only mid point A-B-C type moves. THIS is what I was expecting.

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I have repeatedly said that if we go by cycles, even a L.T. daily Cycle that is due to roll over can rally for 8-12 days, just like those above Mid point rallies. That can be a 2 week run higher and Tuesday was only day 2. This doesn’t mean  2 weeks straight up, so be mindful that it can be 3 up, 2 down, 2 up , 3 sideways , etc. So…

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Summary: The sell off was deep in Miners, and the rebound looks very good. The sell off in Gold was not as deep as the Miners sell off. Gold and Miners both broke below the prior dcl, so that signals a failed daily cycle and should be the start of a drop into an ICL after a daily cycle that rolls over.  Triangles and megaphones can alter things at times.   On the contrary, in Technical analyses,  that is a shake out and bullish rally. When this happens, I personally take the trade set ups and play them out.  I remain aware that a failed daily cycle could peak by day 12 or so, often day 8 can be the peak.   By taking the trade using technical analysis, Miners either do what you expect and you make money,  or they fall apart later.  Miners then sell off into an ICL,  so you can still make some money short term, but you DO NOT HANG ON for the ride down into the ICL.  This could be a mid point rally.  You sell and wait for the ICL to buy. Right now, Cycles may or may not be playing out exactly as they should, it may be time to ignore them again, and use technical analyses. 

HOW DO I PLAY THIS IF I DON’T HAVE A POSITION?

• You can wait for a pull back or a gap fill and buy a miner or two
  

• You can start a small position now and try to add only if you get a dip soon

• You can just wait for things to become clearer.

• You can just continue with your Energy plays until things become clear

I’ve covered all of  what I see, and you know the risks and rewards.  The recent selling caused a LOT of concern and some people rode their positions down. If there is a second leg down, you need to decide now how to get out of your trade. That said, I will add a couple of trade set ups for Miners at the end of this report.

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~ALEX

PGH last week-   You probably saw in the comments section that I was getting a lot of questions about PGH.  Fear begets fear and I think we were getting a lot of worry about it that was spreading faster than my bullish comments could help.  I kept saying that I liked it , the weekly chart was great, the daily chart was great, etc. SO I drew this up and suddenly PGH broke out higher Tuesday, before I could post this.  A break above the 50sma was bullish as shown. Look at the divergence.  300% gains and not even a 50% pull back. Oversold. The weekly chart was posted in the comments Tuesday and in prior reports. 

PGH TUESDAY – I still think that this is a buy anywhere here.  It is trying to break above the 50sma, and when it does, it could make a nice run.

 

FOR THE SAKE OF TIME –  This report is long and will take time to read and digest. I am releasing it at 7:15 Eastern time so that it can be read.  I will then draw up a couple of trade ideas in Miners and you have to come back later and refresh this page to see those reports.  It will take over an hour to add these.   I cannot send out a separate email alert unless I set up a whole new report, so please just return and check down here for a couple of trade ideas later.  I will write in the comments when I am finished.    Please excuse typos, I cannot proof read this  🙂

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TRADE IDEAS –  These are just a couple of the many set ups out there. This will give you an idea of what to look for. This will help you to see what I am thinking, based on what I am seeing. It is a pretty mixed picture, as you will see. 

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IAG –  I want to show both possibilities, to keep us alert and thinking about the possibility of that 1/2 way rally in an A-B-C type drop.  Even a dip to the 10sma ( $4.00) and then a bounce to the 50sma ( $4.70)  is a great trade.  I also want you to think about what kind of gains could be had if this returned to August highs. WHY?

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 Some Miners actually are near their August highs in just 3 days.  THIS had me re-thinking what is happening in Miners. What if other Miners also return to August highs and then break out?  The correction would be over. Lets take a look at 3 strong looking miners , almost back at their 2016 highs. They look like they want to break out.

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EXK – In 3 days , it almost recovered. I would buy this dip if you see one. 

 

SAND – ALL OF A SUDDEN, this picture looks different. Last week it was selling off below the 50sma, now back at highs with very strong volume? This caught my eye.

AAU – Look at that move Tuesday.  This has a solid consolidation period and then a run higher . Now it has another consolidation period and could break out. This could be bought with a stop below the 50sma.

 

THM – This really looks like it wants to run after a consolidation, it looks like it will head for former highs and maybe even break out from there. This would be a buy candidate for that reason and it is not overextended. It is pushing on the 50sma, I’d buy it here. I’d buy a pull back.  I’d buy a break of the 50sma.  POSITION SIZE is based on your tolerance for pain if it drops.

 

TRX –  This was up almost 20% Tuesday alone, but that wouldn’t stop me from taking a position, especially if it pauses.

ASM – This looks like it wants to break out, but is at resistance of a down trend line & the 50 sma. It is hard to buy a stock that has run from $1.90 to $2.50, it could either break out & keep running or drop back down. Buy a dip if one comes? Buy a break out if we get one?  Both are valid if this run continues in Miners.  Look how it ran in June  coming out of the May lows. It was relentless.

GPL –  This chart I drew on Aug 25th for a friend.   GPL has now worked its way to $1.43, breaking above the 50sma. In the long run,  GPL is still a great set up.

 

Finally, one of our readers that does occasionally comment in the chat section  (Thank You Ray) , mentioned that several Canadian Miners were holding up well in the sell off ,  I looked many up and they look excellent. I will point one out below.  This is the List that Ray sent and said that I might want to share it with you all. Some of these tickers are for the Toronto stock exchange.  For example  BCM is  CA:BCM  on some chart sites. You’ll have to find a way to look them up.

 

Some also have OTC tickers in the U.S.

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BCEKF – Canadian ticker CA:BCM  .  This is trying to break out , and see also KLDX . It has broken out to new 2016 highs.

These are just a few of the many trade ideas .  Trades that could be profitable, until we get further clarification to what is occurring in the precious metals and miners sector.  I am still cautious, but I am taking the trades.