Tuesday, January 27, 2009

The rally from last Friday's lows already looks pretty promising, but we'll have a clearer idea of how much steam is percolating beneath the surface if and when buyers take on the 1.3364 peak recorded on January 18. My hunch is that, other than the peak, no serious resistance will turn up below 1.3828, the Hidden Pivot midpoint of a Big pattern that goes back to December 4's 1.2542 low.

With clear sailing to at least 952.30 forecast for April Gold, this vehicle looks poised for an even more impressive run-up. My minimum upside target for the next 8-11 days is 40.40, which implies in percentage terms a thrust more than three times as powerful as the expected gain in bullion. Buying of calls in anticipation should be done at these levels, since 33.78 is the midpoint pivot associated with the 40.40 target. However, let's begin the day with a conservative bid for two March 35 calls (GBJCI): Buy two of them if GDX approaches 32.99, the nearest Hidden Pivot target below. Also, more speculatively, bid 33.72 for a round lot of stock, stop 33.64._______ UPDATE: Bottom-fishing for stock proved premature, but we lost only pocket change attempting it at 33.72. I'll revise my advice to take into account this sign of short-term weakness. ay

Whatever effusion of bullish or bearish targets fevered speculation in the chat room might have us infer, the one at 952.30 broached here earlier continues to look like a sure bet -- a hula number, if you will. The chart reproduced alongside should be starting to look familiar to subscribers by now, but I proffer it yet again so that you might simply relax and enjoy these next 50 points of exuberance the way they should be enjoyed: with the kind of music in your hearrt that only blissful certitude can bring. _______ UPDATE: A little after 4 a.m., it looked like the usual crooks were shaking down gold to as low as 888.80, a ways beneath the so-far low at 894.10. One other HP support to watch: 927.70.

The "Don't Pass" line looks like an enticing bet here, since Best Buy has doubled in price since bottoming at 16.42 in November. However, the minor-cycle uptrend looks like it still has a little ways to go, to a Hidden Pivot target at 30.75. If and when that number is closely approached, buy two February 30 puts (BBYNF). They should be trading for around 1.30 if the target is hit this week, but I'll post further guidance if it looks like an adjustment is needed. To be apprised in real time, keep your bulletin launcher switched on. I've included a snapshot of my option calculator that shows how I arrived at a price for the puts. The 55 volatility comes from TradeStation's option analysis page.

The bullish outlook hasn't changed since I posted targets at 843.25 and 862.50 in the chat room Monday morning. The futures were selling off hard at the time, but this maudlin note of despondence occurred after the March contract had already pushed past four prior peaks on the hourly chart, guaranteeing lots more upside unless Armageddon interceded. Many hours later, at 2:15 a.m., the original targets were still valid, and the higher of the two would still be short-able, stop 863.25. The first is a midpoint resistance, and if it is exceeded by just a little -- say, by a print at 845.00 -- I'd infer the push to 862.50 is under way. _______ UPDATE: The futures screwed the pooch from bell to bell, but the 862.50 target is still valid.