February 2009


Gold has been steadily climbing the last few weeks.  Some fundamental reasons for its climb has been growing concerns over inflation, growing concerns over deflation, concerns on the the ability for the Euro to act as a reserve currency, and concerns over possible US bank failures.

The weekly chart, posted below looks very good.  It has formed a massive bull flag over the last year or so, which is good news for the bulls.  I think fundamentally gold is strong.  Gold in terms of US dollars has actually been lagging all over currencies.  Gold has broken to new highs against almost every other currency in the world.

Some points of interest to me are not just the $1030 high, but also the $990, where it failed last Summer.  On pullbacks I would expect gold to hold above $930 to prove real strength, and $890 a little lower, although I would prefer it not violate the higher level.

One interesting point to note:  large gold miners such as ABX, AEM, GG, and NEM have not followed the commodity into this last upmove to the 980 level.  This could be telling us that a meaningful pullback could be in store for gold futures.  Nonetheless I will be looking to buy into weakness instead of shorting into strength.  We could be witnessing the beginning of a multi-year bull run.

 

 

Weekly Chart

Weekly Chart

The S&P 500 is currently hovering below the 800 level.  With a close below 800 I think we will go re-test the November lows and possibly break them.  Once broken, I’m not sure where we would find support.  The market is losing confidence in Obama, and rightfully so.  All the levels buyers have supported over the last few months have been violated.

I expect a big fight into the close as the bulls and bears battle to control that 800 level.

Another key level I’m watching is the $8 level on the XLF.  If financials hold their lows, then we may hold the lows on all the major indices.

 

Must close above 800

Must close above 800

Here’s a post I just wrote for SMB Capital, the firm I’ve been working at for the last year and a half:

We talk about the easy money constantly in this blog.  Yesterday offered some great easy money opportunities that you have to be able to capitalize on.

The first situation is the 47.50 level in RIMM.  Bella discussed this level the other day in his blog post, and how a great amount of volume went off at that level.  Yesterday RIMM was very weak on the open, selling off from (surprise surprise) the 50 level that was also discussed in that post.  Putting in a bid in front of the 47.50 level and risking ten cents would have resulted in an excellent risk to reward trade.

The second was FCX at the 30.50 level.  A lot of volume went off at the level yesterday in the morning, and then again in the afternoon.  Once it got above the 50 cent level, it developed a 15 to 20 cent range that could have been taken advantage by buying in the low 50’s and selling in the high 60’s, ultimately breaking out above 70 climbing to the high 80’s.

The reason I bring these two examples up is because I remember when I first started trading.  Whenever support broke, I would be looking for weakness, and not necessarily play the long side.  And there were a good amount of times I would get stuck hitting the bottom before a strong up move would begin.  The reason I bring this up is because both those stocks dropped their support for about 2 seconds before having their up moves.  I did not short these stocks when support dropped.  I hit out of my long and re-evaluated.  The only way I would get short would be if there was a big seller at or below the support level.  When the support re-bid, I got long again.

And these weren’t the only stocks I saw this pattern in.  I saw this same pattern in HIG, SPY as well as a few others this week as well.  This is something that you must be able to notice and take advantage of in order to make some easier money. Almost all of the money I made yesterday was in these two setups.  I traded other things as well, but these were by far my most lucrative and stress-free trades.

Enjoy your long weekend.

Intraday 2-13-09

2-13-09 Intraday Chart

Looks like I’m a day late on posting this.  I started working on it last night, as you can see from the chart.  A few things that I really like from glancing at the chart:

  • The double bottom formed in late October and November.
  • The cup and handle pattern formed over the last few months.
  • The MACD divergence (You have to look at a longer term chart to get a better picture).
  • The consolidation between the $5 and $7 range.

I started my long position in late October and then added to it in November, and then during the consolidation above 6.

I think fundamentally, the company is strong.  Bill Cara posted an analysis his firm did on the company about a month ago.  It shows the strong fundamentals of the company, as well as the strong fundamentals behind precious metals.

I expected the catalyst for the stock to trade higher to be whether gold began to trade over $930 for over an hour or so, or if it had a strong move through the $930 level.  This is when I wanted to add to my position.  I missed it this morning, and thus wasn’t able to add to my position.  Earnings are due out next week I believe, so that could be a catalyst as well, either upside or downside.

Regardless, I think this is a stock to keep your eye on.  If precious metals begin their bull market the way I believe they will, this stock could trade significantly higher in the coming months.

One note I must make about what I don’t like about the stock:  they recently did an offering at around US$6.60 per share, which provided for recent resistance.  I would like to see the stock close above $7 on high volume, before I expect it to run. 

 

1 year chart

4 month chart

So somehow in December, my site got all messed up, I lost all my data, and haven’t been able to update.  I finally got around to fixing it.  I’m trying to recover my older posts, and will start posting again soon.