Dec 092014
 

SIL (Silver ETF) has impulsively & convincing taken out both the downtrend & 16.05 horizontal resistance level, thereby greatly increasing the odds that the near-term upside price targets (T1 & T2) will be reached. Consider a stop below 15.65 or higher depending on your preferred price target(s).

SLV daily 2 Dec 9th

SLV daily 2 Dec 9th

 

I also continue to closely monitor the US Dollar, Euro, & Yen for the expected trend reversals, including a breakout of this bullish falling wedge pattern in the EUR/USD currency pair. Should these major currencies reverse trend, even if they just experience a healthy counter-trend correction that might only last a week or so,  that would almost certainly add to the near-term & possibly longer-term bullish case for gold, silver & mining stocks.

EUR-USD daily Dec 9th

EUR-USD daily Dec 9th

Dec 092014
 
CDE daily Dec 9th

CDE daily Dec 9th

CDE (Coeur Mining, Inc) is a silver mining stock which may be forming the right shoulder of an inverse head & shoulders reversal pattern. Aggressive traders anticipating a breakout in silver along with an accompanying rise in the mining sector could take a partial or even full position here at what could prove to be the bottom of the right shoulder, placing a stop slightly below the recent lows, say around 3.85, while adding to a full position if & when prices break above the neckline (assuming that prices do move higher from here & the symmetry of the pattern remains intact).

More conventional traders might opt to wait to see the right shoulder completely formed with a move back up to the neckline, only initiating a long position if & when prices breakout above the neckline. The approximate measured move for this pattern would bring prices to around the 7.50 level (about a 70% gain from current prices) but the exact price target(s) will follow, assuming the pattern continues to play out.

CDE will be added as an aggressive Active Long Trade here and also as a Long Trade Setup & Long-term Trade Idea with an entry to be triggered upon a break above the neckline (again, should one or two fairly symmetrical right shoulders form).

Dec 092014
 

SLV (iShares Silver ETF) is currently flirting with the 16.05-16.09 key horizontal resistance level in pre-market trading while the charts continue to indicate that a breakout is likely to occur soon. A link to the live daily chart of SLV (also shown here) has been added to both the Live Charts Page as well as the Live Chart Links widget on the right side of the home page. $GOLD (spot gold) also continues to trade somewhat comfortably above the important 118o support level with GLD (SPDR Gold Trust/ETF) also trading above the key 114.50 level.

Dec 082014
 

In updating the trade ideas today, the following Short Trade Ideas have either hit their final profit target, were stopped out as per the previously suggested stop criteria (SOAPSC) or no longer look attractive from a risk/reward perspective. Some of these stopped out short trades hit one or more profit targets before reversing & exceeding their suggested stop while others failed to reach any downside profit target. As always, all completed trade ideas on RSOTC are archived indefinitely under the Completed Trades category for future reference.

AON: Dropped 10% following the short entry before reversing just shy of the T1, the sole profit target, and exceeding the suggested stop level or 90.50.

ALK: SOAPSC

AVGO: SOAPSC

BC: Came within 31 cents at T1 on Oct 16th before reversing & exceeding any reasonable stop (none suggested).

BXS: Hit T2 for an 18.1% gain on Oct 15th & has remained profitable since entry. However, As the charts no longer clearly warrant remaining short, BXS will be removed from the Active Trades category.

FFIN: SOAPSC

FISV: SOAPSC after reversing just shy of T1.

FRC: SOAPSC

KIE: Bounced off the S1 (support) level and went on to exceed any reasonable stop.

LYV: Hit T1 for a 7.8% gain then reversed just shy of T2.

OZRK: Came within 1 point of T1 before reversing & exceeding the suggested stop.

PACW: Exceeded any reasonable stop criteria (none suggested).

IWM- SOAPSC

WAB: Hit T1, the final & sole profit target to the exact penny for a 13.9% gain before reversing.

EVR: Hit the first profit target (T1) for an 11.2% gain & went on to gain as much as 18.6% before reversing a mere 12 cents above the second & final target. This trade is still profitable but will be removed as the chart no longer clearly warrant remaining short at this time.

SAVE: Hit T1 for a 23.3% gain on Oct 13th & immediately reversed, exceeding any reasonable stop (none suggested).

Dec 052014
 

I have received several inquires as to my thoughts on gold & silver recently so I figured that I would just share my reply to one of the questions (bottom).  I’ve also updated the charts on the main currency pairs that I have been focusing on lately, the EUR/USD and USD/JPY, which collectively account for over 71% of the performance of the $USD index.

In this post on the $XEU (Euro Index) just over two months ago, it was highlighted that the Euro had about another 2 1/2% downside before it reached a long-term support level defined by the bottom of a large triangle pattern going all the way back to late 2005. The $XEU has moved lower since then and is currently within 1% of that key support level while the charts of both the Euro, Yen as well as the $USD index all looking poised for at least a counter-trend reversal and possibly more. Even if we only get a relatively mild, multi-week pullback in the dollar, both gold and silver look poised for at least a tradeable bounce. Additional notes can be found on updated charts below.

Q: (from Tuesday): SLV reached 16.09 intra day yesterday. Do you feel that was a massive short covering rally or is the 13% rise you had predicted back on the table. Do you look at open interest in examining commodities such as silver?

A: It is my belief that SLV was able to break above the 16.05 resistance level because of the very strong momentum that it had leading up to that level. I referred to it as “inertia” in my last post yesterday but essentially, SLV stopped and reversed at resistance (reversing a few cents + or – at resistance is normal).

As far as short covering, yes… I’d imagine there was a good deal of that contributing to yesterday’s rally. I read somewhere that Friday’s big drop in silver & gold was caused largely by the drop in oil (which was a result of the Saudi’s statement that they were not going to tighten the spigot). Many institutional & large commercial traders, who had actually been accumulating gold & silver recently, were forced to sell some of those positions in order to meet margin calls due to the large drop in crude Friday.

Regardless, I view yesterday’s price action as bullish but we still need to see SLV clearly take out the 16.05 level and really the 16.09 level now that it is the most recent reaction high. It doesn’t surprise me that silver is trading flat to slightly down as it probably needs to digest yesterday’s big gains, plus, it is still just shy of that big resistance level. Better if it were to digest yesterday’s gains in order to reset the very short-term overbought conditions and build up the energy to make a solid & sustained breakout. Until/unless that happens, resistance is resistance until taken out so I wouldn’t try to force any trades in silver just yet.

No, the 13% rally that I was and still am looking for is from the 16.05 resistance level up to the 18ish resistance/target level. (end reply).

Basically I’m waiting to see SLV take out that resistance as well as a breakout in the EUR/USD daily falling wedge. However, Gold has regained the key support/resistance level that I was looking for so all -in-all, I’m near-term & at least intermediate-term bullish but still “cautiously” bullish and waiting for a little more evidence to start adding to my PM positions.

Dec 042014
 
AVGO daily Dec 4th

AVGO daily Dec 4th

The AGVO (Avago Technologies Ltd) short trade that was posted on Tuesday gapped up today on a positive earnings report & forecast. I have often discussed my trading strategy when caught on the wrong side of a large gap, which is to wait for the opening order imbalances to mitigate (typically 30-60 minutes after the open) and then place a stop-loss order just above the reaction high during that initial buying surge period (vice versa for short trades with the stop set below the initial reaction low).

Currently AVGO is trading just slightly above a 3:1 R/R stop level based on the 3rd & final target of 69.20 (based on the posted entry price). In placing a stop just above this morning’s high of 103.78, any additional losses on the position are limited while it is not uncommon to see large gaps like this, especially when the technicals were already warning of a likely reversal in the trend, to be the final blow-off top (i.e.-an exhaustion gap).

As such, AVGO will be considered stopped out on any intraday move above this morning’s high of 103.78. Should the stock go on to reverse from here, the first key support level would be the top of today’s gap, then the bottom of the gap, followed by the uptrend line defining the bottom of the rising wedge on this daily chart.

One possibility to look for, although not very common, would be an Island Reversal Top, which would occur should AVGO gap down tomorrow below the lowest price that the stock trades at today. Should that occur, a new short entry or add-on, with a stop set slightly above today’s low, would offer an extremely favorable R/R entry with minimal downside risk & unusually large profit potential as Island Tops, especially after strong uptrends, usually lead to primary trend reversals. Again, not a very common occurrence but one of the better risk/reward setups in trading out there.

Dec 022014
 

ILMN (Illumina Inc) offers an aggressive short entry while near the top of this large rising wedge pattern with a more conservative/conventional entry or add-on to come on a break below the bottom of the wedge. Suggested stops based on a 3:1 R/R to one’s preferred target(s). Barring a large gap down, ILMN will be added as an Active Long Trade at the open tomorrow.

The large rising wedge pattern on the daily (first) chart below can also been viewed on the weekly (second) chart along with the percentage drops that followed all other similar weekly divergent tops over the last decade (39-68% corrections). Two of those three previous corrections bear markets in ILMN occurred while the US broad markets were solidly entrenched in bull markets (2006 & 2011), highlighting the fact that money can be made shorting the right stocks at the right time in a bull market. My plan for this trade is to take a fractional position here near the top of the pattern, adding to the position if & when prices break below the bottom of the wedge although I may also decide to cover my position on the initial tag of the uptrend line (then shorting a full position on a break below the pattern).

Of course the markets are dynamic and as such, so are my trading plans. T2 at 136.10, which is set just above the 134 horizontal, is the current preferred swing target at this time. Should prices ultimately make a solid break below the 127 support level (not drawn on this chart), especially if the broad market were to be in a confirmed downtrend at the time, the chances would be good for a back-fill of the thin zone that runs from 134 down to the 86 level.

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