Oct 10 – Have A Seat

Welcome to Wednesdays trading, please have a seat and we’ll start out discussion…

SPX – I believe that this is day 36 and I would expect that the markets can pull back into a dcl at anytime.  This remains a strong market, able to peak around day 36  ( R.T. Again).

QQQ –  The NASDAQ consolidated this time, rather than rally higher like the DJIA, RUT, and SPX.  Since it just broke out, the dip for the QQQ could be a back test or tag of the 50sma.

UUP ( USD) – The USD continued its drop with a swing high in place, and Gold continued its pop, but Miners did not.  We’ll discuss that soon.

WTIC –  This chart from Stockcharts is inaccurate, OIL actually shot higher and closed over the $50 mark. That type of a pop may look similar to the strong POP in August that bounced off of the 50sma and then still rolled over into a dcl, because I believe that it is too early for a dcl. here,  so…

OIL –  This shows that big POP on Tuesday and a dcl on day 26?  I tend not to think so,  they usually occur day 30 onward, but never say never in these markets.  Oil did look strong with that pop.

GOLD –  I also think that this stockcharts chart is incorrect, because Mondays trade seems to be missing, however it shows the trend line break and break above the 10sma  ( DCL)

GLD ( For GOLD) –  GLD tagged the 50sma and stalled.  That makes this Day 2 and still remains oversold.

BY REQUEST: We need to discuss Miners

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Are you leveraged?   GDX only dropped 17 cents & GDXJ dropped 1.29%  (  yes, I know,  Gold was higher so it seemed uncomfortable), but with just a 17 cent drop, I again see concern, frustration, etc.  This may not be a perfect trade set up for everyone,  especially if you are leveraged, holding NUGT OR JNUG, You might need to ask yourself  what I ask myself –

1. Am I too heavily positioned, am I swinging for the fences at the wrong time?

2. Did this 17 cent drop scare the daylights out of me? Is leverage on a down day affecting my emotions adversely?

3.  Would a smaller position make this trade easier to ride? Smaller gains, smaller losses.

4. Should I cut my position size to handle the wiggles better?

The following charts are simply to clarify what you could be facing in the days ahead, but I am pretty sure that I have made this clear in the past too.  No surprises here,  we know that this is a trade that has limited upside, but what path it takes is unknown.   When I entered my trade, I use the following ideas to just  ‘set a stop somewhere, and walk away’.   I accept that it may run higher & I can sell on day 8,10 , or even 12 – or I may get stopped out or lock in smaller gains.    Think about this – Day 6 was Tuesday and Day 6 was the high for Miners so far, so this is playing out normally, with Miners leading.   Miners  are already off of the lows, so if yesterdays small dip seen in the chart below was very unnerving, some may need to watch position size and leverage.  Yesterdays drop simply erased Mondays pop, (see the chart) .

GDX #1 –  And the GDX chart at a glance doesn’t look bad at all, as DAY 6 peaked as the highes day so far and stayed above the 50sma so far.  Sell and lock in your position if you are uncomfortable.

GDX #2 – I see drops of that proportion often in past moves higher, and price still continued higher.  I have a stop a bit below the 10sma right now,  I may raise it to the 50sma later if we continue higher, but you may see a shake out at the 50 to tag the 10sma. That would be normal too.

GDX #3 – Can this drop to the 10sma and reverse & run to new highs on maybe day 8 or even 10?  YES.   Can it drop to the 10sma, get stuck under the 50sma, and have a day 6 peak and roll over later?  YES.  Yes, that could be the peak,  decide NOW where you will sell as a downside limit.

GDX #4 –  So this would be a Peak on day 9 or 10 or so, still keeping this L.T., but convincing bullishness to draw in more bulls. This would obviously be a profitable trade out of this set up.

GDX #5 – You may see this, but honestly,  I cannot tell you day by day what GDX or GDXJ will do. This would obviously make this trade set up turn out to be quite profitable.

GDX #6 – This sideways ‘weakness’ would have a day 6 peak in place (Yesterday), and then a roll over into that dcl. after Gold Peaks.

Note: My stop could be below 23 and I am fine- so be it.  IF this happens, The trade didn’t run as high as I would have liked from this trade set up, but it is fine.  Maybe I’ll catch Dust or find another trade set up. I win some, I lose a smaller amount, and I live another day to trade.   “It is what it is”  as they say.

 I may not even discuss Miners in tomorrows report.  This should cover it all.  We still had trades in NAK, INFI, IDRA, HOS, MBOT, IPI, TGB, HBM,  possibly  CRMD, APHB, etc etc that I wanted to discuss, but this was important and took some time to put together today. I may discuss trade set ups in other sectors in tomorrows report.    This is exactly why I never ‘recommend’ leverage in a 3rd or 4th daily cycle.  I use heavier leverage in the ICL and 2nd Daily cycle, but the move out of the lows in later daily cycles are not always a good strong pop initially.   For many, this is too frustrating unless it goes a bit higher day by day.  Moves can be up & down and Up and Down – and for some,  the day by day moves are difficult to ride, especially if you have leverage or are too heavily invested  .   We now have 6 charts of GDX above to help show you how it may play out.  We could still see a bullish move higher,  or day 6 peak may be as high as it goes.  It can drop and tag the day 6 peak again on day 9 and be done.  We just dont know, but what we did know approaching this trade is that I did not expect a run to new highs, I expected it to be a L.T. daily cycle, but time is the enemy in a set up like this.

 Review:  Miners were running higher as Gold dropped last week, and many individual miners looked pretty good, many holding up well for a while ( NSRPF, DRD, EXK, CDE, for example).  Now Gold moved higher on day 2 and GDX dropped 17 cents, some Miners dropped too. The set up that we have in front of us has not really changed, but time is moving forward and that concerns many.  We know that this should not be an explosive rally to the upside and may not last very long.  This is simply 1 of many ‘trade opportunities’ , as price moves out of a dcl., but if I knew exactly what GDX or GDXJ would do, I would only have needed one GDX chart above. I needed 6 to show a few possibilities,  it can be tricky and less predictable.  Is this trade for you?

 Let the 6 charts above of GDX offer you several ideas of how this could still play out and may it help you decide whether to stay with the trade, exit now, lighten up a bit if you are too heavy, drop leverage, etc.   There is always another trade, I have other trades in place that are not of this sector, and we will have an ICL ahead of us.  Even if an ICL meanders out of the lows, it usually offers great gains over the following couple of months, and that is the best trade set up this sector has to offer…

Enjoy your Wednesday trading

~ALEX

Why did I not sell my EXK on the drop yesterday?

EXK – At this point, it looked similar to Aug 29, and that was basically a 1 day event. It did not break my boundary line.

1. In August it gapped open , made a new high and dropped quickly toward the 10sma.

2. The same type of large drop occurred yesterday.

3. In August the selling stopped there at the 10sma the next day,  and then made new highs again.

Unfortunately, If EXK breaks the 10sma, it may be a back test of the 50sma, which we know is also common.