Gold & Commodities

The Gold & Commodities category is a sub-section of General Market Analysis that includes charts and commentary associated with precious & industrial metals such as gold, silver, and copper as well as various commodities such as oil, gas, wheat, corn, etc…

Jan 262015
 

The DUST (3x short miners)/GDX pullback trade gapped above the 13.75 resistance/preferred target level today and is will now be moved to the Completed Trades category. With DUST falling shy of my profit target on Friday, the gap today allowed for a more favorable exit price on the trade and a quick 20.6% gain in less than four full trading sessions, that's in addition to any would-be losses or profit give-back on the long mining positions that I was able to book profit on when the charts indicated a pullback was likely.

Although my plan from last week was to add back the long exposure to the mining sector once my pullback target was hit, other than a few core positions in my longer-term accounts (IRA's, etc...), I might hold off on adding back exposure to the sector for now. I'll continue to monitor the metals & miners and will communicate my thoughts as I go but as of right now, my gut tells me to just sit back & watch how the metals & miners trade for a while until adding back exposure to the sector.

 

The charts above are the original 15 minute chart of DUST from last week followed by today's updated 15 minute chart along with the Friday's 60 minute chart of GDX highlighting the most likely scenarios followed by today's updated 60 minute chart.

As today's first few 60 minute candlesticks show, GDX hammered off the first horizontal support line/bounce target shortly after the open today, managing to close right back above the bottom of the ascending price channel (white uptrend line) and moving higher within the channel since. Overall, today's price action has all the signs of a potential reversal in the miners so a GDX long here with a stop below today's lows is certainly objective although again, my personal preference is to sit tight & let the dust settle (no pun intended) before re-engaging the mining sector.

note: For categorical purposes, inverse (short) ETFs are always added to Short Trades Categories (e.g.- Short Setup, Active Short Trade, etc..), even though you will actually go "long" the position in order to short the index or sector of the trade idea. For example, DUST has now been moved to the Completed Short Trade Category along with GDX (as the posts related to any inverse or related leveraged ETFs are also tagged with the more popular 1x long ETF (e.g.- QQQ/QID/QLD/TQQQ/SQQQ or SPY/SSO/SDS/SH, etc...)

Jan 232015
 
USO 60 minute Jan 22nd

USO 60 minute Jan 22nd

USO (crude oil ETF, along with UCO, the 2x long crude ETF) is current trading at the bottom of the recent trading range although we now have double positive divergence (back to back bullish divergences) on the 60 minute time frame. Those divergences would still remain intact should USO make a relatively brief & shallow break below the recent trading zone. In fact, at this point I would almost expect a brief breakdown which could serve as a bear-trap & flush-out move.

As the UCO trade is taking longer to play out than expected with crude trading sideways in this highlighted consolidation zone since Jan 6th, my focus going forward will be on the USO (1x crude ETF) chart, which does a better job of tracking crude prices over time as prices are not prone to the same decay as the leveraged ETFs.

The most likely scenarios are illustrated in this updated 60 minute USO chart; either a move higher from around the bottom of the zone or a temporary break below before prices reverse. Any move much below the 16.00 level would most likely open the door to a new wave of selling.

Just to clarify, I still only favor a short-term swing trade on crude at this time with a slight possibility of a longer-term bottom. I just don't see enough technical evidence on the daily & weekly time frames to make a solid case for a lasting bottom yet. My ideal longer-term scenario would be to get the decent counter-trend bounce that I am looking for (19.80-20.55ish in USO), followed by a thrust down to a new lower low, while forming higher highs on most of the price & momentum indicators (i.e. - a divergent low on the daily chart).

With that being said, recent volume patterns in USO look highly capitulatory and a lasting bottom in crude may possibly be close at hand. As for a longer-term swing trade in crude oil and/or the energy stocks, we'll just have to continue to monitor the charts for any bullish developments.

Jan 232015
 
GDX 60 minute Jan 22nd

GDX 60 minute Jan 22nd

I'm still expecting a little more downside in GDX at this point. Several potential reversal levels shown here with 20.70 being my preferred correction target, at which point I will most likely have added back all my long exposure to the mining sector if/when we get there. I have placed a sell limit order on my DUST pullback trade just below the aforementioned 13.75 trade (sell limit at 13.67) although I might decide to pull the trigger before then, should I see any developments in the intraday charts that convince me to do so.

Jan 222015
 
ABX daily Jan 22nd

ABX daily Jan 22nd

The ABX (Barrick Gold Corp) long trade has hit the second & final target (T2 at 13.21). As this was the final target, consider booking full profits or at least raising stops if planning to hold ABX as a long-term trend trade or investment.

Regarding the miners in general, GDX is still quite extended while struggling with resistance around the 23.00 area. On Tuesday's post titled "Pullback in the Miners Likely...", I stated that I was only "looking for a pullback to around the 22 area". GDX did indeed pullback yesterday, falling as low as 22.10, close enough for government work although I suspect that we could possibly get one more run down to the 22 area, possibly lower although with the fact that a decent pullback in the miners already occurred (helping to alleviate some of the near-term overbought conditions), I don't believe that the odds favor another short/pullback trade at this time.

Personally I was holding out for a slightly larger pullback before covering (selling) my GDX short (DUST) and adding back exposure to the sector and with GDX still trading below yesterday's high, I will continue to hold DUST until we either get one more thrust lower (targeting the 13.75 area on DUST) or I am stopped out (on a move above yesterday's high of 23.22 in GDX).

Just to reiterate, I remain longer-term bullish on the precious metals & mining sector. Longer-term traders & investors who are also bullish and have been accumulating gold, silver, platinum and/or mining stocks should not be overly concerned with the short-term swing targets and analysis based on intraday charts, other than to possible help time entries/add-ons and in managing/ratcheting up stops.

Remember that a very bullish case, both from a technical and fundamental case was made for the mining sector all the way back on November 7th in this post (click here to view). At the time, GDX had just hammered off of the bottom of a descending broadening wedge (DBW) pattern (bullish price action) on the weekly time frame with strong bullish divergences in place. The first chart below was one of two charts from that post highlighting the pattern (the other chart made a bullish case for the miners based on valuation) and the second chart below is the updated weekly chart of GDX. Note the large volume surge leading into the November lows as well as the high volume on the impulsive move higher since. While I would expect some pullbacks along the way, my expectation remains a continued move higher to at least the top of the large DBW pattern.

Jan 212015
 

These are the latest 60 minute charts on both UCO (2x long crude oil ETF) and USO (1x long crude oil ETF). Based on my analysis of the charts, I still expect an decent oversold rally in crude oil from at or near current levels although in hindsight, I thought that the bounce would have already played out by this point and as such, should have opted to trade USO instead of the leveraged UCO, which has basically choppy around in a trading range since the original entry two weeks ago.

Regardless of the fact that crude prices did not immediately make a sustained rally towards the initial price targets following the breakout above the 60 minute bullish falling wedge pattern, the sideways price action over the last couple of weeks could be due to the fact that crude is forming a base from which to launch decent rally up to my current preferred target of the 10.58 area (with a suggested sell limit placed slightly below). Any solid and sustained break above the bottom of this recent trading zone would be bearish & most likely open the door to a new wave of selling.

The 18.60 area has formed a decent resistance level over the last few weeks and as such, any solid break above that level is likely to be the catalyst for a relatively quick move towards the 19.80 resistance level (first target on USO) and quite possibly the 20.54 level after that (which is comparable to my 10.58 resistance level on UCO).

Jan 212015
 
SLV daily Jan 21st

SLV daily Jan 21st

SLV (Silver ETF) hit the second & final short-term swing target today. That tag of resistance also corresponded with a kiss of the top of the ascending broadening wedge pattern that was first discussed in the January 9th Precious Metals & Commodities Outlook video.

Once again, I would like to reiterate that I remain longer-term bullish on gold, silver & the mining sector but in light of all of the major precious metals making an near-term overbought run into resistance over the last day or so (the PPLT/platinum long trade also hit T1/resistance yesterday), we may continue to see some additional profit taking and/or sideways consolidation in the miners before a solid resumption of the uptrend. More active swing traders might consider booking partial or full profits and/or raising stops on SLV while longer-term traders & investors might consider raising stops at this point and strategically adding to their metals and/or mining positions on pullbacks to support.

Jan 212015
 
DUST 1 minute pre-market Jan 21st

DUST 1 minute pre-market Jan 21st

The DUST (3x short gold miners) quick bounce/hedging trade idea posted yesterday is currently indicated to gap slightly below yesterday's LOD (low of day). With gold trading higher overnight (largely as a result of the $USD trading lower), the miners (GDX) have been indicated to gap higher throughout the pre-market session although those gains have started to fade since about 8:30am ET.

With DUST currently trading right around the suggested stop (a few cents below yesterday's LOD of 11.21), my plan is to pull my stop and re-enter it after the first 30 - 60 minutes of trading. The shaded areas on the 1-minute chart below show the after-hours & pre-market trades in DUST. As always, employ stop criteria that are commensurate with your own trading style & risk tolerance.

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