Question: Do You Know What This Is Called?

Answer: Frustrating !  Actually its an example of a trading range. Often after a stock or index Price has run higher , you get a sideways consolidation that is called a trading range. They can form as flags, wedges, channels, etc.  It can be a trading opportunity on one hand, buy the lows & sell the top/ flip and short the top ,  ride down to the lows.   If you aren’t an active  trader, however,  and you are just waiting for some directional move,  a nice trend to ride?  It can be a little frustrating. Its tough to tell which way it will break, and the chart above actually looks like it may break higher.   The chart below is the end result of the chart above.

The reason that I bring this up is because our markets are currently in a consolidation too…

This is the NASDAQ represented by the QQQ’s. It too is range bound and yesterday put in another reversal.

SPX –  that is a reversal candle

You can see how a trader would trade this.  Buy the reversal lows,  sell at the top,  go short at the top and ride it down , etc etc until it finally breaks in one direction or the other.  I have been doing this with 1/2 my position in TZA, but have held the other 1/2 through out , thinking that we were going to break down one of these time.( See the wkend report for my discussion on TZA, TECS, SDS, etc)

This is TZA-  broke out higher and gave it up  (reversal)

Thinking that the markets want to test the high volume lows in Oct and also seeing weakness,  I have traded TZA. I know some have also purchased it, but I dont know if they did so wanting to hold as a trade just inside  the trading range?  Or buy looking for QQQ to drop to Oct lows?   At this point , we have a reversal and follow though may be back to the top of the range  (Where it risks breaking out higher ).  You  could sell TZA because of that reversal and watch the QQQ as it approaches the 50sma. It has been rejected there and that is the area where I have added TZA.

With the reversal yesterday right at the lows  (no break down) it is likely that price  (  see the chart above of the QQQ)   is heading to the 50sma or the top of that trading range.  I know this can be frustrating for non-traders who want to see these markets either break out higher or break down lower….but we trade what the markets give us. They are still in a trading range.

OIL

I pointed out this weekend that OIL broke out, looked legitimate and now the energy stocks that we saw had double bottomed may start to run. I showed a chart of NEM and pointed out how the miners had a similar shake out as these energy stocks  seemed to have just done . The shake out  worked, They shook me out & I sold all of my  energy positions for small gains, and they are now higher.

OAS is an energy stock that looks like the Miners did in Dec/Jan. Double bottom, great volume. MACD divergence, and so on. I am watching how they approach their 50sma

  GOLD –  Hasnt re-gained the 10sma. Held support. Cycle count a little unknown , could have put in a DCL, could be too early.

GDX – Miners later in their cycle. was a low already put in? Possibly on day 2 of a new cycle, or very late in the 2nd daily cycle.   GDX re-gained the 10sma yesterday, see if it holds and can break from the possible bull flag,  or drops to a DCL day 33 ,34  ? 

With the above questionable count in cycles, the positive is that many Miner are holding up & still look like Bullish  set ups . They were pointed out in the weekend report. I like when more than just 1 Miner is acting bullish when the gold count is hazy.  To see Bullish looking charts ,  see  AU  ( below) , AG, CDE , GFI, HMY ,NG , GG, NEM, ABX, and more.  I like the way they are acting.

GFI – at highs

Its hard for me to recommend buying Miners when we arent sure of cycle counts, but if you are in front of a screen or holding a core that you purchased lower, I would be comfortable holding until we see signs of weakness.   I am comfortable adding too. I actually added to AG on it’s dip and have purchased NUGT on dips, but I am in front of a screen all day. I see bullish set ups so far, but they also are consolidating and some arent comfortable with any down side.   If thats the case , but you want to buy …you need to buy the dips.  Buy at lows if we have a pullback.  I pointed this out on AG to show that it has held up .  Just a 38.2% re-trace.

Wrapping it up.  I am buying MIners and have been since the possible Daily Cycle low. I CANNOT be sure that we wont get another dip.  I cannot be sure that that was a daily cycle low. If you are buying and cannot be in front of a screen, buy at an area where you can place stops & you’ll have to honor them.

I think ENERGY plays are materializing , we had pretty much perfect entries in my energy report, but unfortunately  I think most of us took profit or got stopped out.  I would have been stopped out if I didnt sell on the day that I was going to my parents house to help them shovel out from the storm.  I couldnt watch it and felt more comfortable “Out”.     That reversal in OIL was strong and they recovered quickly.  Short covering can move things fast.

EX…this was how I felt about BAS and I had owned it . JAN 28. ( THAT is what the miners did too, as shown when I pointed out NEM.  Shake out type move). 

BAS Feb 2 –  That down day is hardly seen already. This now looks like a buy set up right here, but the 50sma may stop it from running.

REXX – nice run

SO I am again watching energy.  Was that a LOW in oil? will it double bottom? If so, will these energy stocks that have already double bottomed just run to the 50sma and coil along under them, building steam for a break higher? I will be watching for that. Some are currently trade-able if you are a trader.  

Some MINERS are trade able too. I pointed out EXK here Jan 29.  Buy above the magenta lower trend line, stop at the 50sma I mentioned that it may go sideways and form an inverse H&S

This is now – forming an inverse H&S?

So for now, the market is set up for traders.   Its trickier than normal , because the moves are volatile, but there are  Trades in Energy, Trades in Miners, and Trades in that consolidation that looks to want to break down, but so far is just building steam dropping and popping. That is what the markets seem to be offering .  If you are able to be in front of a screen you have an advantage.   If not and you want to buy something,  please use stops .  There are many trading opportunities. If we pullback in METALS/MINERS/ Or ENERGY today I will include some in my morning report.  Thanks for being here!

~ALEX

P.S. When I started writing GOLD was up at $1282,  it has since sold off to red  at $1267.  Thats why the market is for traders, but todays selling MAY offer an opportunity in you favorite Miner.  Is it dropping to the 20sma?  Is volume Light?  Better yet,  is it rising while GOLD is dropping?  Is it holding support?    (AU , GFI, AG , NG and a few others have been).