Tuesday, February 17, 2009

There is little to trade on the daily chart, since the futures seem bound for a test of last autumn's thick band of consolidation (which began around 1.2350). The hourly chart is another matter, however, and a dip to 1.2583 should be viewed as an excellent buying opportunity. use an initial stop-loss at 1.2569, switching to a 20-tick trailing stop at 1.2616. _______ UPDATE: The numbers would have worked perfectly for anyone who traded them, since the targets precisely bracketed the morning high and low. After bottoming at 1.2571, two ticks shy of our stop-loss, the futures rallied to 1.2621, triggering the trailing stop (and/or partial-profit taking) by five ticks. They have since traded as high as 1.2638 this morning, yielding a theoretical profit of as much as $550 per contract for a 90-minute hold.

I'm resisting the temptation to say the hell with pivots, let's just short this hoax. We'll stick with our usual, disciplined approach nonetheless, initiating trades only at Hidden Pivot rally targets (of which there are unforunately too many at the moment). The nearest worth a shot looks to be 100.55, so let's try to buy one July 80 put (GSSP) if and when the stock closely approaches the target. I estimate the put will be selling for around 10.45 then (see snapshot of calculator; I've plugged in a Tradestation volatility of 84). Option volatilities for GS are in the stratosphere, and that is why we are taking a cautious approach. Even so, there is some edge in acquiring July puts for anything close to fair value, since they do not routinely come in for sale. ______ UPDATE: GS scorned our timid attempt to get short, opening lower on a huge gap. The stock is currently down $8.55, 20 cents off the so-far intraday low.

Selling has been drying up recently on most days when it looked as though bulls might get routed. That raises the odds that November's lows near 800 are going to provide buoyancy if the futures probe for support there this morning. However, if support fails, look for a potential buying opportunity at 780.00, an appealing Hidden Pivot. Use a 780.25 bid and an initial stop-loss of 779.75, switching to a 2.50-point trailing stop if 789.00 is touched on the bounce. Minimum objective: 793.00. _______ UPDATE: As of 1:20 p.m., the futures have traded as low as 786.75. The 780.00 target is still valid and should induce a bounce, but I'm going to suggest lowering the bottom-fishing bid to 773.25, a tick above a promising (and more conservative) Hidden Pivot support. You can stop this trade as tight as 771.75, but don't attempt it with less than an hour to go in the session.

Whenever gold's uptrend stalls for more than a couple of days, as it now seems to be doing, disappointment never fails to surface in the chat room. Let me reassure you, however, that impulsive rallies such as the one shown in the chart seldom simply sputter out before getting second wind. Notice how the 954.00 peak recorded last Thursday exceeded four prior peaks, including a daunting "external" high created last October, and another -- a look-to-the-left-er -- before the rally went into a so-far three-day consolidation. This is unambiguously bullish, and it would take a swoon this week exceeding 875.70 to make it any less so. Under the circumstances, a test of $1000 would appear very likely. The challenge will be to catch a ride north on the lesser charts. The least risky way I can see to do this would use a b-c pullback from just above a tiny, 948.70 peak made on the way down last Thursday. It is easily visible on the 15-minute chart, if you're interested. ______ UPDATE: Gold blasted sharply higher overnight, hitting 975.40 so far today. My minimum upside projection for the near term is 995.00, a minor Hidden Pivot 'D' whose sibling midpoint has already been surpassed.