Gusher

The Oil and Energy Stocks were leading the way with their recent bullish activity. As pointed out yesterday, the XLE broke out from a downtrend and was probably signaling that OIL was about to follow. Quite a few of the stocks were up 20 – 30% in 1 day yesterday! We’ll discuss more about the potential here in a moment, but first lets review the rest of the market action.

SPX–   Resistance is overhead.  A pause below the 50 sma may be building energy to break higher, and a break above could see buyers rush in and push it higher.

Why is it possible that this resistance wont hold it back?…

 The Dow is already pushing through the 50sma and has a bullish chart set up.  No weakness is seen.

NASDAQ – This seems a little slower on the uptake and has a lot of resistance over head, but the MACD is bullishly aligned too.

So the above charts call for caution if anyone is contemplating going short at resistance.  These charts look as though they want higher price.

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$WTIC – Oil finally broke out from that flag pattern and I believe that it has built energy to break higher, even above the 200sma. The measured move is shown. 

I will discuss energy stocks again a bit more after looking at Precious Metals. Yesterday I posted charts and gave you a list that did very well.

GOLD, SILVER, & MINERS

I always start with Gold, but today I want to point out something else.  Many times you’ll hear that Silver & Miners lead Gold.  So lets start with Silver.

SILVER – Nice break out & follow through.

GDX – GDX broke from a triangle type base and has excellent follow through.

So if SILVER & MINERS  (And OIL) broke out,  I would expect that Gold can and will. This is a resistance area, so it needs watching.

So I have pointed out many triangle type bases breaking out.  Often they run the length of their starting point, as shown by the magenta lines in ABX.  They can extend and run further if short covering and buying increase.   If we are in a Bullish run – you would expect a pause,  or pullback to test the 50sma, and then higher prices. That remains to be seen.

I mention the above because various people/traders differ when it comes to selling.  Different people like to sell at different points.  Some just want to scalp 5% and get out & enter another trade-  repeat/repeat/repeat.  Others watch price hit the B.B. and exit.  Others want a target measured out.  Still others just set up a trailing stop & let it remove them from the trade. I tend to give our traders here a low risk  entry point and a stop below that should not get taken out- and have them sell based on experience. 

Here is a guide that I use. I look at past rallies and often they run higher and along the way they pull back to the 9ema. See an example here.

2013 GDX run –  I also do not sell just because price is above the B.B., because I have seen price push those limits in stronger gains. They also may just go sideways. In a 2nd daily cycle, I tend to try to at least keep riding some positions. I may start heavy & sell partially – and have a running stop a bit below the 9EMA or 10 SMA.

Selling is NOT easy, because we all want to sell the top tick. THAT hardly ever happens and when it does, it wasn’t skill unless your measured move ticked exactly where it should have & you got out.

This is why I dont sell simply because price is at the B.B.  – Strong moves ride the B.B. A trailing stop was best for this run.

Notice that GDX in 2014 hit the B.B. and dropped back to the 9EMA area,  then went higher and did it again and again. Why am I pointing this out?

GDX is currently outside of the B.B. and some on Stocktwits were shorting Miners because it was at the B.B.  If GOLD breaks out, there is that chance that the  Miners run up the B.B. like we saw with CLNE.

Also I noted something in the comments yesterday and wanted to point it out here. When I say that I use the 9 EMA, someone said that it was way below price as though it is too low.  It climbs every day. It will follow price higher as seen in this chart. Each day it has been jumping roughly 40 cents.  When GDX pulls back, the 9 EMA will be higher.

A last note on selling option. I do use measured moves to sell at times.  A-B-C-D  targets. You will lock in profit that way, and that is good, but in strong runs out of solid bases or sling shot type short covering rallies , you might miss the meat of a move.  Shown here in the last SA run.  Selling at “D” was fine, but that price had never been seen again. ( SA looks ready to break higher here too- measured move to around $8.50 – $9). 

If you just want to lock in some gains? Buy the proper set up and sell the break out. Buy the next proper set up, sell the pop. You will miss the meat of many trades, but you wont give any back either.

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So Miners and Energy stocks are running strongly.  They are breaking from nice solid bases and nice set ups. Lets take a look at the action.

SGY  Oct 5 – yesterday I posted this set up

SGY Oct 6 –  Pop up 30% out of that base

BBEP Oct 5- Double Bottom Base posted here yesterday

BBEP Oct 6 –  Breaking out and has further to go in my opinion.

So we see these Bases breaking out sharply.  We need to find stocks inside those bases with good set ups.

Another one that I posted yesterday is AREX,  and I bought it.  It didn’t POP 30%, but it did pop 12% and is still inside of it’s base, so this is currently a buy in my opinion. It broke above the 50sma.

LGCY – This stock has not really taken off yet.  In the past it has put in some nice runs, so I am thinking that it may play catch up. Right now I see it approaching the 50sma.

I also wanted to point out a couple of smaller, low priced stocks in this area. Look at what KEG and SFY did yesterday.Both popped over 30%. 

So could GDP be the next big POP? It was up 8% yesterday and the set up inside of a base and under the 50sma is there.

Reminder: These are LOW price stocks and must be treated as risky. Yes, I posted this as a recovery possibility story, but there is risk here too.  I mention RISK as a possibility too, so we are not piling all in hoping for a home-run.  That approach can be dangerous.

So let me close by adding a list of stocks that you can look up. I cannot possibly post every good set up that I see. I posted this list yesterday, and these traded  very well.   I will add a few more to it. Search for low risk set ups in these charts, the time is right.

WPX, CHK, XCO, LGCY, CRK ( Great move) , WG ( Huge pop) RES, CPG, KEG ( Huge pop, just starting?) , HK, EXXI ( huge pop) , REXX ( breaking out) ,AXAS, PACD, WG, GDP, QEP, CRK, SD, PQ ( ready now?) , UPL, WTI ( ready now?) , CHK ( ready now?) , AREX ( Ready now?) , SDRL (in a base,but popping now), etc

 Yesterdays report is still valid, I mentioned some miners and energy stocks there and I thought that yesterdays action was proof positive.

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I want to close with 1 interesting development.  Some call these a lottery ticket, in other words, a gamble .  I pointed out the wedges in a past report, showing how they can lead to great moves over time.   These descending wedges can squeeze into an apex and build up pressure to explode higher. They dont ALWAYS run & run & run, but they can.  Let me show you an example.

So I also pointed out TGD  Descending Wedge on the weekly chart. Huge capitulation type volume occurred , but price hardly dropped.  I buy that because to me they cant seem break it down further.

This is TGD now. It broke above the Wedge yesterday and closed above the weekly 10ma  (so far).  I see huge volume for just 2 days.  I have a core position in this stock because it is often a bottoming wedge.  Some Miners bottomed a long time ago  (RIC, LSG, etc)- maybe this is a bottom for TGD. It needs to be stated that price “might” drop & test the wedge break out, but doesn’t have to. Look again at the shanghai wedge- it just slowly climbed higher and then took off later. 

That is an interesting volume footprint as it moves out of the wedge, so I just wanted to re-visit that thought from a past post. A break from the apex is a buy, but again this is a low price higher risk stock. Also they are high risk in this environment because a mining company could run into trouble financially until Gold finds higher price.

~ALEX