Don’t Get Too Cute

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Fridays report is a preview of what I will be discussing in the weekend report. I want to explain why sometimes traders become victims of getting a little too cute.  Let’s discuss this a little bit right now…

I have some newer readers here, so I wanted to express the importance of being invested at this time. I offered several trades yesterday and almost all of then started to move higher  ( Some very nicely, up 10-15 %).  Different traders do have different styles and some wrote to me and said, ” I grabbed your CDE trade at the open and sold it in the afternoon, so I  locked in a cool 10%!”  Is there anything wrong with that?  No.  That is scalping some gains, and that is a style that many like to employ to avoid giving the gains back. It can be very effective and profitable, and I have done that in the past too, just collecting 10% here and 10% there does add up nicely, however…

.

At times I do not like to get “too cute”, and that time is when we are coming out of a very oversold ICL. The weekend report is going to discuss this further, but for today let me just briefly say that-

 

-Yes, we will see pull backs along the way

-Yes, you can scalp trades and make money, and try to buy or re-enter on a pull back

-However, I want to show here that when Precious Metals are coming out of an ICL, you could miss out on the bigger gains by scalping.  Some may wish to scalp partially and stay invested too with ‘buy & hold’.  Let me explain.

 

GDX – GDX broke above the downtrend line, and you can see that by scalping gains a week ago, one might have missed this current follow through. I can picture this back testing the trend line in a dip to a dcl, but that doesn’t have to happen. Let me discuss this buy & hold approach further  (at least a partial position).

Now let me show you something important about ‘getting too cute” by trying to scalp each 1 day jump higher.

 

CDE & AG –  These were recommended ‘buys’ yesterday and jumped 13%.  Scalping here locks in gains, and if that is your style, that is fine.  I just want to point out that when these are  coming out of an ICL, these can just run and run and run away.

Notice CDE CHART #1  coming out of an ICL last January onward.  You could have scalped 5 – 10 % all the way up, but getting in at a lower price was not easy and in some cases, not even possible. Please read the chart, it was a bit of a runaway move.

CDE CHART #2 –  Great trading scalping  maybe 7-10 % here and there, right?  But what really happens coming out of an ICL?

CDE was really up over 400% from The ICL – lows to highs,  and 300%+  from the arrows of scalping.  The ‘perfect’ scalper may have pocketed 40% on small trading positions?   For the patient ones the gains were crazy good, and we saw  CDE, AG, TRX, VGZ, MUX, etc, etc, double, triple, and quadruple.   I encouraged selling a small portion after large surges higher and adding on the dips, while holding core position for this reason last January onward.  That is my trading style.

 

Continuing on…

 

GDX last January coming out of an ICL.  Day 5,6,7,8,9, & 10 were actually a LOW point. No pullback, it was sideways for a week and then this took off upside!   Boom and anyone ‘getting too cute’ was left behind. Here at Chartfreak, I was warning traders not to get left behind.  Look at this chart and ask yourself,

” If  I sold on day 7 or 9  or even 10 of the daily cycle, where would I have re-entered?”    Food for thought at a time like this.

 SO I will discuss this further in the weekend report.

 

 As I write, GOLD is down over $4 and it looks like we might get a pull back, but remember that in a Bull Market move,  especially out of an ICL, ‘surprises are often to the upside”.   YES , we absolutely could have multi day pull backs along the way.  No, I am not guaranteeing that this move will go straight up again.  Sure we could even see bigger pull backs than what we saw last year at this time, because Bull runs buck and kick to shake off new riders.  My advice is simply this, as we come out of an ICL,  keep some skin in the game and ‘don’t get too cute’.

We all have our own trading styles and I don’t think that Mine is right and yours is wrong or visa-versa, they can all be effective and profitable.  I am not saying to everyone , “YOU SHOULD BE ALL IN AND THATS FINAL!”  NO, I am saying that you want to at least have a position , some skin in the game, just in case we take off higher like last Jan – March 2016.  I am just here now to show that there is the real risk of getting left behind and missing some great gains in the coming weeks if one goes to all cash at this stage of the run.  The history of the above charts can be our guide.  Thanks for being a chartfreak member.

Enjoy your Friday and have a great weekend!!

 

~ALEX

157 replies
  1. Ralph Wiederzane
    Ralph Wiederzane says:

    Being able to stay in winners while riding out inevitable pullbacks is one of the hardest things to learn in trading, it’s also the single most profitable and will change your life once you can do it consistently.

    Great report, short and sweet.

    • chartfreak1
      chartfreak1 says:

      Fear and Greed rob the profits

      I left it up to the reader to keep “Skin in the game” , showed reasons why I find it reasonable , and left it to them to decide how much skin in the game. “That;s all I can do”

      Fearing a beat down, I imagine they ( You ) would be more cautious, maybe avoid leverage, be aware of proper position size based on risk tolerance, etc.

  3. Cason
    Cason says:

    No big reaction to payrolls yet. Wouldn’t be suprised to set metals settle down a bit, healthy as long as they don’t get hammered. Let’s see how everything looks by the open in 1 hour.

  5. nancytheartist
    nancytheartist says:

    Thanks for the Friday report. I will just add a comment and that is the cost of trades if you scalp a lot. You get charged buying and selling and that eats into your profits, and there is the tax rate on short term trades too which you get hit with later. I only started trading again a year ago because Merrill offered me free trades and a good platform if I put a chunk of money with them. Now I do have the freedom of moving in/out without that constraint…but I was surprised at how it ate up profits when all costs were added up when I did not have free trades.

      • nancytheartist
        nancytheartist says:

        They still have it going for me! I think it was Cason who joined Merrill to get it too. It really has given me freedom and is why I started trading again last February… and why I signed up with you to help! I had been following you for years where you posted online.

      • Bill
        Bill says:

        I moved from TD to Merrill a few months ago. Free trades with my account and they paid me cash to move. One of my accounts is a margin account, so I can trade daily if I want. The other isn’t so, I have to wait for the 3 day settlement.

          • Bill
            Bill says:

            I did complain they were not competitive. They gave me like 20 free trades. Not enough, I get unlimited free trades now. One downside to Merrill is they won’t let me trade some ETF’s, ie the now defunct UWTI, UGAZ, etc. Leveraged mostly. But, BOIL, JNUG, NUGT are okay

        • nancytheartist
          nancytheartist says:

          You are a daring man Bill! Margin scares me! I have the 3 day acct. and got so active once I joined Alex that I got slapped with a “free ride violation” early on…I did not even know what that was! I learned my lesson.

          • Bill
            Bill says:

            Well to be clear, I don’t trade options at all. I have the account authorized for it so I don’t have to wait for the 3 day trade to clear. The only stipulation is the trades have to be in stocks over $10. Not sure why, but I can day trade if I want.

          • nancytheartist
            nancytheartist says:

            I got clearance for options, but they are not free trades…plus, I got KILLED with them when I last traded. Not for amateurs…I learned that the hard way.

    • Glmus
      Glmus says:

      I trade with Scotttrade who will be TD in several months. They pay me interest on my cash which covers my trades – I have had the same manager for 20 years, she is wonderful. Once it moves to TD, I will look into Merrill and see where I can get the best deal. Thanks, Nancy.

          • nancytheartist
            nancytheartist says:

            When I traded years ago, I was with OptionsXpress and those charges really hurt, and they had the best prices back then! I still have an account with them, but I use it mostly because I like their charts best. I don’t trade much there.

      • Steven
        Steven says:

        Can i ask why you’d move to merryl, i have both, scottrade and TD? Just curious, is it just they offer interest on cash? Thanks

        • Glmus
          Glmus says:

          Money is a consideration of course. But maybe I can negotiate a better deal. Also, diversification among brokers is a consideration. I have a little money in Schwab doing nothing. But, bottom line, I don’t want to confuse myself by trading two different accts during the day.

  6. Glmus
    Glmus says:

    To get another view of what Alex is alluding to in this report, slap a WEEKY Heiken-Ashi chart on our favorite golds/silvers/etc. Then scroll through the charts starting Dec 2015. My TC2000 shows beautiful charts green bars up (I make them thicker by switching to line first and making the line chart thicker then back to H-A) and red bars down. Enjoy.

  8. Glmus
    Glmus says:

    I figured that ‘they’ would take some profits and try to shake us out in the first hour. I was all red to begin, now I have a few greens. I watch the first hour a lot. When we were getting hammered, they would run golds up in the first hour only to hammer us the rest of the day. Now that we have an uptrend, I suspect the opposite will be true. Hammer in the first hour, then join the fun. So far, the hammer is very light.

    • Carlnetscouts
      Carlnetscouts says:

      Looking a lot better now. Thought they would do a little more shaking as well. Maybe we’ll go straight to the 200DMA and pause for a bit there.

    • nancytheartist
      nancytheartist says:

      I think “they” are manipulating till they have the positions they want. I am very mistrustful of our markets.

    • Cason
      Cason says:

      So, I expected the exact inverse today. Open lower, rise up to test it – that becomes the HOD – and sell off. So that 1000 AM was a long entry yesterday so is a short entry today.

      I scalped JDST. I WAS gonna post in real time. Set a limit sell, as a day trade only. I’m married to the long side, but a buck is a buck so I can make 1 going down as well will do it. In true rookie fashion I set limit too low, went to an appt and came out it had already been hit. A winner, but now I need a bit more downside protection than I thought!!

  9. Ken
    Ken says:

    A good example of CF’s thesis in todays report:
    I “thought” Uranium (URA) was at the top of it”s wave and stated I Sold a % of my position Then this morning URA gaps up another +2% But I am still reaping profits maybe not as much but still profiting ya know ?

  10. Glmus
    Glmus says:

    I added some GSV and FCX to my acct on hourly buys hoping to buy on the first hour pullback. Sadly, the pullback is still going on with four minutes to go. Maybe I will be sorry.

    • Glmus
      Glmus says:

      Sadly, we are an hour and a half in and no turn around in sight for me – down 1.9%. I am still awaiting (hoping for) some hourly buy signals, but not yet.

      • Glmus
        Glmus says:

        Sadly, the turn up is not showing up. I am not thinking of selling yet, but down 2.4%. Not what I expected.

  12. Cason
    Cason says:

    So for those of us not already in CDE, here on your entry. I just grabbed my first half. Adding to SAND, AG as well.

    • Cason
      Cason says:

      Sold JNUG trading position at 8.94 yesterday. Will add back this afternoon, likely at $1.50+ lower than my sell point. Selling in miners a little rougher than I expected considering gold only down a get bucks, really.

  13. Erik Sven
    Erik Sven says:

    Alex, do you still follow Tinka? Weekly chart looks good? I wonder what the recent volume spike means? TKRFF.

    • Glmus
      Glmus says:

      Gold doesn’t seem to be cooperating. I have been hoping to have some hourly buys to pop up to tell me the worst is over. I got a 30 min buy on ABX about 15 min ago. I bought some and am down 5 cents. 🙁

  16. The Seer
    The Seer says:

    Agree Alex – I trade more like you. We do not know when the next shoe drops on the banking system in any country or the yen has flown up or some “war/violence” and we wake up and the miners are way up. In this black box marketplace it may be a good strategy for those who are not as ready to just get in to go in smaller fractions (1/10 at a time instead of 1/2 or 1/3) to ease their way in. The mature more experienced traders have stronger stomachs to not get kicked off the bull.

    • Edward Bernhart
      Edward Bernhart says:

      You make a good point, Seer. I think the likelihood of having bad news greeting us on a Monday mornings outweighs the risk of carrying positions through the weekend. Of course the implication is the “news” more likely will be bad and the “flight to safety” will involve gold. We don’t know which button the MSM will push at any certain time to remind us of how precarious our economic situation is, as if it just appeared.

      • Maria
        Maria says:

        Be careful with those 3xers case.. PLEEEASE…..I thought you got off that emotional roller coaster this past NOV ish… Best to go easy. Stay humble lest daddy gets angry and spanks* u again with another don’t get emotional report. 😡

        *a line id happily stand in line for.. *giggle smirk
        #HFT

  23. Steve Tytler
    Steve Tytler says:

    I’m not usually a day trader, but I bot 5000 shares of JNUG at $6.83 looks like it is reversing.

      • Aniket
        Aniket says:

        Sure it looks bad on chart but think about it. For every single share sold it was bought. Agree some of that would be short selling, covering but towards bottom I see new buying coming. GDX GDXJ NUGT JNUG were on BoW last time I checked. Now question is, who is buying all the way down?

  25. The Seer
    The Seer says:

    Dec 23 was the closing low for CDE and AG as barometers. The right shoulder in gold is on the weekly chart.
    GDX low was Dec 15. The trend wave is up. We have waited a long 5 months . . . .

      • Maria
        Maria says:

        hahahah… LOL #TRUTH

        *sigh… i luv this place… it’s like going to “CHEERS” everyday … except I’m drinking coffee…

        *now we just need a “Norm” so we can yell out his name when he comes in ….. ;o)

  28. Glmus
    Glmus says:

    Update: Although we have only 30 minutes to go, I see some good news. My acct has gone from 5% down to 4% down. Also, working with TC2000 support, I was able to construct alerts in my watch list which tell me when I have green H-A candles in my stocks – green is good. Nearly all of my 30 min H-A candles are green and many of my hourly H-A candles are green. I am also seening some hourly buy signals trigger which would confirm (hopefully) that we have completed a pullback. Also it would be nice if gold would get off its bottom. Also NAK is sluggish here.

    • Carlnetscouts
      Carlnetscouts says:

      A decent close considering. The back test at 194-195 HUI held and there was buying into the close.

    • Steve Tytler
      Steve Tytler says:

      The difference this time is that last Friday miners sold off hard in the last hour of trading. This time, buying came in during the last hour of trading (which is what I was hoping for on myJNUG day trade). So things are looking good. 🙂 I’m a longer term swing trader and my charts show miners switched to a “buy” (up trend) this week on my weekly charts for the first time since the first week of February 2016. They have been a “sell” (down trend) on my weekly charts since last August.

      • Cason
        Cason says:

        The biggest volume was the 11AM superslam, but a good bit of the volume alsi came with the end of the day buying.

        • Steve Tytler
          Steve Tytler says:

          On my weekly chart, GDXJ was a “buy” in February and remained in an up trend until August. As you know, I don’t trade cycles I try to follow trends. Unfortunately, I foolishly ignored PM’s last year because I had been burned so bad in 2012 & 2013. I decided NOT to make that mistake again this year.

  30. Steve Tytler
    Steve Tytler says:

    Sold half my JNUG to lock in profits. Will hold some over the weekend, may lighten up more before the close.

  31. Cason
    Cason says:

    Ok, so I guess I was clobbered today like everyone else. And was REALLY worried about 2:00 or so. And I was WAY early on that JNUG entry. But the stay positive, I did have a very quick but profitable daytrade in JDST, JNUG closed above my buy today, and I lowered my recent JNUG cost basis by $1.70.

  32. rg64
    rg64 says:

    Not messing around with my miner positions here.
    I am also long VALE old turkey from last May at 3.98. Trying to hold on for long term cap gains.
    Working out so far.

    • chartfreak1
      chartfreak1 says:

      Very nice on the VALE buy & hold.
      NOT EASY with all of the consolidation that it went through this year, but the cap gains difference if you’re in the US is like 25% short term vs 15% long.

      And as long as you hold it, you dont have to claim a thing.

  33. Cason
    Cason says:

    Man, big volume came in at close on ETFs. Now, most of that is re-balancing NOT new purchases/sales since this is a ETF and very common. 30M today and 35M yesterday. Why? Trading interest. This can only happen with extremely high level trading in the underlying. So clearly metals have the attention of a BIG money traders right now. Something big still brewing. Volatility has been epic.

  35. Ann
    Ann says:

    Hi Alex- I’ve done some reading this weekend on how POT, MOS and likely IPI are setting up so well due to the MJNA industry. It may be a way to play this industry as well. IPI is still holding that flag quite well. Also, have a look at AMRS, it’s just under the 50 day, possibly set to break out again : )

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