RNO (Rhino Resource Partners) has hit the first target in less than one trading session for an 11% gain. Consider booking partial or full profits, depending on your trading plan. T2 remains my preferred and final target at this time.
The JO (iPath DJ UBS Coffee ETF) has hit the final target (T2 @ 22.92) for a 10.7% gain. Consider booking full profits and/or raising stops for those who plan to hold as a long-term trade. The previous & updated 60 minute charts as well as the weekly charts of $COFFEE (spot coffee prices) below illustrate how using multiple time-frames can be used successfully to “catch a falling knife” as this trade was entered less than 2% from the bottom of a vicious bear market that chopped off about 2/3rd of the value of spot coffee prices.
Although it is still too early to declare with confidence that the bear market in coffee prices is over and that this is anything but a counter-trend bounce, the recent price & volume action as well as other bullish technicals highlighted on the $COFFEE weekly chart do help support such a case. As stated in the original post on Nov 6th, the JO trade (as well as coffee futures for those preferring a pure play on coffee prices) still has the potential to morph into a longer-term swing or trend trade. As previously stated, the 2nd target on the JO trade based off the 60 minute time frame was my final target for this trade and as such, the JO trade will now be moved to the Completed Trades category. However, JO (and $COFFEE) will remain as Trade Setups in both the Long (typical swing trades) and Long-Term Trade categories.
Those who are longer-term bullish on coffee prices may therefore decide to hold some or all of their position here while raising stops to protect profits. The next buy signal for both JO and/or coffee futures remains on a solid break or weekly close above the weekly falling wedge pattern on $COFFEE. Waiting for prices to print a weekly close above the downtrend line helps to minimize the chances of chasing a false breakout but could also lead to a less-than-optimal entry should prices explode higher during the week following a breakout. Therefore, each trader must decide whether to take an intra-week breakout or wait for a weekly close above a resistance level/buy-point when trading off the weekly charts. Something that I will look for if taking a breakout of a weekly chart during the week would be for a breakout on above average volume (at least 1.5x the average volume for the last 60-90 days) as well as any other bullish price action, such as a bullish reversal candlestick pattern on the daily frame.
The RNO Long Trade Setup posted last week has triggered an entry on a break above the descending channel. I also wanted to point out that going forward, many of the static charts will list both the suggested target level as well as the actually resistance (for longs) or support (for shorts) level. TC2000 just added a new feature to the latest beta version update which will automatically add the exact price level of a horizontal line. As many of the price targets that I use are based off horizontal support or resistance levels, I find this to be a very useful feature. As I have often stated, my suggested target levels (T1, T2, etc…) for long trades are typically set slightly below the actually resistance level in order to help assure a fill as a stock will occasionally reverse just shy of resistance, especially well watched levels.
(note: Although the previous post correctly referred to the pattern as a descending channel, the previous 60 minute chart posted below incorrectly listed the channel as a wedge pattern. However, the net effect of the breakout is essentially the same… i.e.- a breakout & likely trend reversal)
GCAP (GAIN Capital Holdings Inc.) will be added as an AGGRESSIVE long entry here around 7.13 as the stock has plummeted over 50% to key uptrend line support (daily chart) while also at horizontal support with bullish divergences in place on the 2-hour chart. GCAP successfully hit the final target for a 25.3% gain early this year on the previously long trade, with the stock going on to make a parabolic run which terminated a few months ago, followed by a very powerful reversion to the mean (i.e.- the primary uptrend line where GCAP is currently trading). As overshoots of support are always a possibility when a stock is in a very powerful downtrend, I plan to keep my stop very tight on this trade (slightly below 7.00). This gives the trade an exceptional R/R (about 20 cents downside to nearly 2.00 profit potential or nearly a 10:1 R/R). However, I would also put the probability of being stopped out above average as this is one of the proverbial “trying to catch a falling knife” trades. One alternative and slightly less aggressive entry would be to wait for a break above the minor downtrend line which defines that small bullish falling wedge pattern on the 2-hour chart below.
Several new charts have been added to the Live Chart Links page including several new global stock indices as well as some gold & silver mining stocks which appear to be setting up in potentially bullish chart formations. Most of these charts are marked with basic trendlines and horizontal support & resistance levels with prices targets as well as additional annotations to be added in the coming days & weeks as well as some additional trade ideas in the mining sector.
As I’m still leaning towards a marginal new low (below the late June lows) in gold prices, as well as many of the mining stocks on my radar, I will hold off on adding any new Active Trades in the mining sector at this time unless I see a well-defined and objective entry on any specific mining stocks. As with the Gold & Silver Stocks post made back on June 26th, the very day the mining sector hit a major bottom before gaining roughly 40% from there, my preference will be to use a ‘shotgun’ approach of scaling into the most promising individual stocks within the mining sector although one could also use GDX as a proxy and more diversified vehicle for trading or investing in the sector. My best guess would be that the sector may continue to drift lower or chop around until sometime around mid-January but with a lot of eyes on the sector right now and gold so close to that long-term uptrend line, in addition to the gold stocks coming off extreme oversold readings with bullish divergences in place on the weekly charts, I wouldn’t be surprised to see the gold stocks begin to move higher before the metal. This 2-hour GDX chart shows a couple of likely near-term scenarios, should GDX make a solid breakout above this most recent descending channel:
With $GOLD nearing the downside target on my preferred scenario posted just over two months ago (the nearly 14 year long-term uptrend line & 61.8% Fibonacci retracement from the Sept 2011 peak), both GLD & GDX are among the more promising long-term trade ideas for 2014. Although my preferred scenario has a prices in GLD & GDX moving slightly lower, volume patterns on GDX are highly indicative of a selling climax and the miners could bottom at anytime now. As such, a scale in approach to GDX and/or select mining stocks over the next couple of months is my current preferred strategy.
A link to the live, annotated chart of the GDX daily chart shown above has now been added to the Live Chart Links page. As the mining stocks are among my favorite long-term trade ideas for 2014, I will also be adding a new category of chart links on that page showcasing some of my favorite individual stocks in the sector. That category as well as the other live charts will be updated on an ongoing basis to include some of the most attractive or important stocks, ETF, sectors or broad indices so make sure to check back from time to time for any additions.
In updating the trade ideas today, the following stocks will be removed from the Active Trades category to the Completed Trades category in order to focus on the most attractive opportunities at this time. Many of these trades have already hit a profit target or remain profitable at this time while a few are slightly underwater at this time.
HOV- Although this trade is still profitable and may very well continue lower to hit one or both of its price targets, HOV has been locked in a frustrating trading range ever since the entry earlier this year. In order to focus on more promising trade ideas, HOV will be removed from the Active Trades category.
JPM- JPM is currently trading around 5.25% above the original entry which came on a break below the 14-month uptrend line back in mid-August. Just over a month later, on Sept 25th, JPM hit a low 50.06 vs. the first price target of 50.04. From there the stock bounced to recently make a marginal new high while putting in even more powerful negative divergences in place so as with so most other recent short trades, this one may very well go on to hit the second and final target of 46.58.
KBH- This home builder stock hit its first profit target about a month after the short entry was triggered back in late June and has since floundered around in a relatively tight trading range around that level, still profitable at this time. Like most other short trades being removed today, KBH very well may break down from the current trading range and move lower to hit the second and final target but will be removed in order to focus on trades with a more favorable R/R at this time.
KEX- KEX moved lower after entry but reversed about a point above its first target and has been backtesting the broken uptrend line from below since.
KO- KO is another short trade that is still profitable and continues to looks promising longer-term for those who wish to remain short. The short entry for KO was triggered on a break below the steep ascending channel on the daily chart back in late May. KO went on to drop about 13% from there, so far reversing just shy of the first target but is still profitable by nearly 7%.
LEN- As with the HOV & KBH trades mentioned above, LEN is another home builder stock which has already hit it’s first profit target and remains solidly profitable at this time. Two separate short entries were posted on LEN, giving the trade an average entry price of 38.22. LEN is current at about an 8% profit from that level after making it down about half-way to the 2nd target for a nearly 20% gain before reversing. As with the other home builders, LEN has chopped around in a trading range around the first target level for months now. As with the other builders, I believe that the additional target levels will likely be hit over time but I am removing LEN from the Active Trade category in order to focus on trade currently offering clearly bearish technical patterns and better R/R profiles.
M- M (Macy’s) was most recently covered in the Nov 7th Short Trades Update video in which I mentioned a typo that I made on the final price target. M quickly hit the first profit target after the entry earlier this year and continue to fall reversing exactly on my final target line, however due to mix-up, I had incorrectly listed that target as 42.08 on the chart when it should have been about 15-20 cents higher. (The stock reverse at 42.18 and never looked back).
PWRD- PWRD hit the first profit target shortly after entry and still remains profitable. However, the stock has recently experienced some very volatile, sloppy price action which has muddled the charts somewhat. As such, PWRD will be moved to the Complete Trades category at this time.
SBH- This trade is essentially flat, trading less than 3% above the original entry price. Basically, the stock has chopped around in a frustrating trading range for what seems like forever and with out a clear read on the chart, SBH will be removed from the Active Trades category for a slight loss.
UNP- UNP was shorted at 156.00 in Sept and is currently trading at 160.72 or about 3% higher. As the technical picture is now somewhat obscure, UNP will be considered stopped out for a small loss and moved to the Completed Trades category.
The remaining Active Short Trades look fine at this time and updates will continue to be posted as important technical developments occur (targets hit, breaks above/below support/resistance, trendline backtests, etc…) As always, feel free to contact me if you any questions about these or any other trade ideas posted on the site. Also keep in mind that many of the trade ideas now have links to the live, annotated charts which are updated regularly, sometimes without a new post & static chart. The live chart links (for trades that have one) can be found under the most recent posts by selecting the ticker symbol from the “Posts By Ticker Symbol” drop-down menu on the right sidebar of the home page. This would be the preferred method when following a trade (vs. bookmarking the live chart link) as the link address to the live charts are occasionally changed or updated.
The original short entry on GS (Goldman Sachs Group) was posted on Sept 24th while GS was backtesting the recently broken large bearish rising wedge pattern (orange) as show in the first (previous) chart below. Note how GS has been stair-stepping higher with the white minor uptrend lines with clearly diminishing momentum on each new minor uptrend. The next short entry or add-on will come on a break below this most recent uptrend line. Click here to view the live, annotated chart of GS.
CME will trigger a short entry on a break below 77.10 which is both the primary uptrend line as well as the bottom of the support zone. Click here to view the live chart.