SLV (Silver ETF) has hit T1 hit for a 5% gain. Consider booking partial or full profits and/or raising stops, depending on your trading plan. Reactions (i.e.- pullbacks and/or consolidations) are likely as each target level is hit although I favor at least T2 on SLV and may likely add some additional, longer-term targets as the case for a lasting bottom in both silver & gold have recently strengthened considerably with the breakout of the downtrend as well as the inverse head & shoulders pattern in gold. Couple the recent bullish price action in gold & silver (and the miners) with the fact that the dollar continues to soar to new multi-year highs and that gives us the potential for a very strong rally in the metals & miners if & when the dollar finally begins even just a half-decent pullback.
Long-term Trades are trade or investment ideas that have the potential for significant returns over a longer-term period, typically several months or more. This category of trade ideas might be useful for the longer-term swing trader or investor looking for investment ideas to supplement their existing portfolio and prefers a less active, more hands-off approach to investing.
The longer that I trade & invest, the more it seems like I'm watching the same movie played over & over every few years. It's the never ending cycle of booms & busts and if I were to categorize the genre of movies that I'm watching, I'd have to lean more towards labeling them as comedies vs. dramas. The comedic part is the infallible repetitive nature of the general public, the mainstream media and, of course, the part played by the puppeteers pulling the strings.
Funny to see how bearish the most recent headlines are AFTER crude has plunged nearly 60% in just over 6 months. Where was all that talk of a massive glut in crude production back then? If one just stops reading the headlines and focuses on the charts, they might come to the same conclusion that I have that a bottom in crude is much closer than both the media and the puppeteers (hedge funds/institutions that are talking oil down right now while most likely taking the other side of the trade... think GS betting against their clients at the peak of the housing bubble).
I've highlighted two developments on this 20-year weekly chart of $WTIC, the first being a specific technical event (weekly oversold readings on the RSI 14) and the other relating to fundamentals (under-supply & over-supply). As a full-time trader back in 2007 & 2008, I clearly remember the almost manic cries about peak oil. Hardly a day went by without reading or hearing about how the reality of peak oil was rapidly closing in on the world. Once oil crossed the $100/bbl in early 2008 the chatter only intensified and by the time oil reached nearly $150/bbl a few months later, even the guy that cuts my grass was talking about how $10/gallon gas was right around the corner. Click here to view on article published by Investopedia back in 2008 which concludes with the following statement: Even conservative estimates predict a peak in years, not centuries. The question now is what will we do to be ready for it?
We all know what happened from there and even with the roughly 75% plunge in oil prices that immediately followed the July 2008 peak in crude oil prices, crude didn't even come close to reaching such oversold extremes as it now has (although the "supply glut" chatter seems to be about on par with the "peak oil" chatter back then as best I can recall). With that being said, I've started combing thru the charts looking for some long-side trade ideas on energy related stocks, some as both potential bounce (oversold) trades as well as longer-term bottoming plays, in which I plan to use a scale-in strategy. Some of the candidates that I found so far that fit both categories (poised for a potential bounce and possibly a longer-term trade) are: RIG, SLB, CAM, DO, QEP, NOV & SFY. I will follow-up with some charts including entry & exit (targets/stops) levels asap, on some of these as well as any other attractive candidates in the sector that I come across but I just wanted to throw out a few names at this time for those who might want to start adding some exposure to the energy sector (other than trading crude oil directly).
The charts below (in order) are: A 20-year weekly chart Light Crude Oil ($WTIC); a screenshot of a Google search for "Peak Oil", narrowed down to headlines from Jan 1, 2008 - July 11, 2008 (the week that crude oil prices peaked at their all-time high); a snaphot of the aforementioned Investopedia article showing the "experts" prediction for peak oil; and finally a screenshot of a current (today) Google search for the term "oil production glut" (noting how the vast majority of "experts" predict this glut to continue for years).
CDE (Couer Mining, Inc) is approaching both horizontal (dashed) and downtrend line resistance while overbought on the daily RSI. As such, I am booking full profits here for a 45.5% gain from the original entry just over one month ago. The other factors leading to my decision to book profits early on this trade is the fact that both gold & silver are now approaching major resistance levels; the primary downtrend in gold as well as the 16.05ish former support, now resistance in silver (see GLD & SLV charts below).
The CDE Active Long (swing) trade will now be considered completed while CDE will remain an Active Long-term Trade with the current final target still at 6.55 (T3). Longer-term traders/investors willing to ride out any pullback should at least consider raising stops to protect profits.
CDE (Coeur Mining, Inc) has hit the second target, T2 at 5.82, for a 38.6% gain since the original entry less than one month ago (Dec 9th). My previous comments on this trade, including my own personal trading plan, was to make T3 and/or T4 official price targets if gold & silver continued to exhibit bullish price action. So far that is exactly what has happened recently with gold now trading healthily above the 1180 level and both precious metals moving higher recently despite the continue parabolic move higher in the US Dollar... very bullish action IMO although admitted it could prove to be only a short-term disconnect between the usually inverse relationship between the dollar & precious metals.
With the fact that I remain bullish on both the metals & the miners, CDE will remain an Active Long-term Trade with T3 at the current preferred target at this time while I will go ahead and consider the Active Long (i.e-swing) Trade (click on each trade category to read the definition of each) as completed here at T2. Therefore, consider booking partial or full profits and/or raising stops, depending on your trading plan.
There are a couple of significant technical developments on the CORN (Corn ETF) active Long Trade & Long-term Trade idea worth noting. From a longer-term perspective, the charts remain constructive and my expectation remains that prices will continue to work their way up to the second resistance zone (R2 zone) on the $CORN (spot corn prices) weekly chart over time. However, there are some potentially bearish shorter-term developments that could lead to a sizable correction before then.
On the daily chart of CORN (Corn ETF) below, CORN appears to be in the latter stages of a potential bearish rising wedge pattern, complete with negative divergences in place. As such, it would be prudent to consider booking partial or full profits and/or raising stops to either a solid break or close below the bottom of the wedge pattern. Should CORN trade below Friday's low of 26.24, I will consider the Active Long Trade on CORN stopped out. However, CORN is also categorized as a Long-term Trade and the stop for that trade will remain a weekly close below 25.00.
CDE (Coeur Mining, Inc) hit the first profit target (T1 at 5.25) for a 25% gain on Dec 23rd while I was away on vacation. So far, the inverse head & shoulders pattern is playing out nicely although I have yet to officially extend the final target to either T3 or T4 (T2 at 5.82 remains the current final target).
As previously stated, how silver trades going forward will most likely determine whether or not the price targets are extended on this trade. If silver prices begin to rise, especially above the 18.80ish level (spot prices), T4 (7.20) which is the measured price projection for the IHS pattern, will most likely become the final target on this trade. As always, consider booking partial or full profits and/or raising your stops as each target is hit, according to your trading plan.
First off, I'd like to wish everyone a very happy & prosperous New Year! After taking quite a bit of time off vacationing with friends & family in cold but beautiful Winter Park, Colorado, I have now returned home & have begun to focus my efforts back onto the financial markets. Upon recently reviewing the charts from a relatively fresh perspective, my previous theme for the 2015 remains the same, that is my expectation that commodities are likely to outperform equities despite the fact that the primary trend in most (but not all) commodities remains bearish at this time while the primary trend in equities is still bullish.
Assuming that my prognostication proves to be correct and that aligns with your own analysis, how one chooses to position to take advantage of such trend reversals depends largely on one's trading style and objectives. Shorter-term swing traders might opt to aggressively position long in precious metals and select commodities (and/or short select equities) following bullish (bearish) pattern breakouts, dips to key support (resistance) levels/moving averages, or following high probability bullish (bearish) candlestick reversal patterns, especially in conjunction with capitulatory volume patterns.
Until the intermediate & longer-term trends have clearly reversed, active/aggressive traders might consider booking full or partial profits (or set trailing stops) at the lower-end of the target range for those counter-trend trades. Once technical evidence builds that the primary trends have reversed, my preference will begin to shift to longer expected holding periods and larger profit targets (T3, T4, etc...) as those trades begin to morph from counter-trend trade to "inline" trend trades. Of course, every effort will continue to be made to post both long and short trade ideas that are inline with the current trends in various assets classes, as long as those trades offer attractive risk-to-reward profiles.
Longer-term swing traders, trend traders & investors might opt to wait for one or more longer-term trend indicators, such as certain moving average pairs/trios; primary trendline breaks; etc... to confirm an entry on a trade or investment before establishing a position with a primary focus on the daily & weekly time frames.
With that being said, here are a few different technical patterns on gold. The first chart below is the daily chart of $GOLD (spot gold). As pointed out a few weeks ago, $GOLD may be forming a Right Shoulder of an Inverse Head & Shoulders (IHS) Pattern (neckline has been slightly modified since that last update). Most importantly, $GOLD continues to hold the key 1180 support area that I have been focusing on for months now, albeit, by the slightest margin at this time. A break above the neckline AND the intersecting primary downtrend line would be quite bullish while a solid close below the 1180 area and especially the November lows would be bearish.
The next two charts below are a 4-year, 2-day period chart of GLD (gold ETF) along with a zoom-in of the daily chart of GLD showing two possible technical patterns: An Ascending Broadening Wedge and a Bear Flag. Bear Flag patterns are continuation patterns, meaning that prices typically continue in the direction of the trend leading up to the pattern. As the daily zoom-in chart illustrates, GLD has already broken down from the bear flag and successfully backtested it from below before continuing lower. Should that pattern play out, the measured target of the pattern would project down to around the 97 area in GLD.
Also shown below is a possible Ascending Broadening Wedge (ABW) Pattern. These patterns can appear during both uptrends as well as downtrends, as is the case here. Statistics on every technical pattern vary but one credible source reports that ABW patterns break out in the direction leading up to the pattern 76% of the time. Essentially we have three fairly well defined technical patterns on gold right now; the IHS (bullish), the Bear Flag (bearish) and the ABW (know to break either way although the odds favor a downside break due to the trend leading up to this pattern). Mixed signals for sure and of the three patterns, only the Bear Flag has yet to trigger a breakout. Therefore, more convention or risk-adverse traders & investors might opt to stand aside until we get a clear resolution of these patterns.
With that being said, there is an attractive R/R long-side entry on gold here around currently levels. A preferred trading strategy for ABW patterns is to position long on the third tag of the bottom of the wedge with a stop not far below. Today prices slightly overshot the bottom of the bottom of the wedge on the gap down in GLD with prices immediately reversing & moving up back inside the wedge (the third tag of the lower trendline). Therefore, an aggressive trader could establish a long position on GLD here with a stop just below this morning's low of 112.32. With GLD trading at 113.73 as I type, that give the trade a downside risk of just over $1.40 with an upside potential of at least $4.25ish (my minimum target to the downtrend line around 118) or much higher, should prices break out above the downtrend as I continue to believe is the most likely scenario.