May 2011

If you’ve grappled with the concept of the one-off ‘A’, this recording is essential. Although the session was shortened somewhat due to computer problems, it contains some of the most illuminating material I’ve presented on the topic. Specifically, we used a telling one-off ‘A’ in gold to identify a very precise spot for the nasty correction currently under way to reverse. There are strong reasons to believe that June Gold, currently trading for around 1497.10, will come down to at least 1370.10 before it can turn around. Find out why by reviewing this lesson.

Multi-day rallies in Gold and Silver have left them just shy of thresholds that, once exceeded, would take some of the strain off bulls. Further details, along with charts to illustrate, are included in today's trading touts.

A 39.565 peak is equivalent to the one given in Gold today, since July Silver will need to get past it to give bulls a reason to relax just a bit.  Otherwise, the futures will be vulnerable to a downdraft to as low as 34.175, the Hidden Pivot midpoint of the pattern shown.

Although Gold's run-up over the last few days has marginally exceeded the 1518.50 target I'd used to project minimum upside for the near term, the 1520.00 peak narrowly missed creating a bullish impulse leg on the 240-minute chart (inset). That will require a push above 1522.10 -- a short distance from current levels, though not necessarily an easy leap. If the futures instead fall without having bettered 1520.00, the first place they are likely to find traction is at 1490.20, a midpoint support (A=1522.10, B-1462.50, C=1520.00).

Using a stop-loss as tight as five ticks, currency traders can play off the 1.2265 target of the pattern shown. Because it does not closely coincide with any structural supports, it yields enticing odds.  The bigger picture, evident on all intraday charts, has been bullish since last Wednesday, when the futures spiked a March structural resistance at 1.2398. _______ UPDATE (10:41 a.m. EDT):  The futures never quite made it down to the target, although the sideways move of the last week doesn't look to have fully corrected the rally begun from 1.2074 on April 27. If the futures should pop nonetheless, crucial resistance lies at exactly 1.2543, the midpoint resistance associated with a 'D' target at 1.2791 (A=1.2074, 240-minute chart).

The distributive, opening-bar feints are growing hell of tiresome, besides making it more difficult to cover the May 38 puts we shorted against June 40 puts we are long. SLW is working on a minor, 38.620 rally target that would become an odds-on bet if its sibling midpoint at 37.510 gets roughed up. Unfortunately, downside risk is $2+ if the stock catches another air pocket.  All things considered, I'll recommend bidding 1.05 to cover the three May puts, day order.

The rally continues to impress the pivot-trained eye with its feebleness, but that doesn't rule out the possibility that DXY is primed to leap opportunistically with each new morsel of bearish financial news that comes dribbling out of Europe or Standard & Poors. In any event, I'm going to slightly revise my numbers, stipulating now that the leap surpass 76.61 (vs. 76.43 given here earlier) to signal a bullish event with a valid claim on our attention. _______ UPDATE (1:06 p.m. EDT):  Today's strong thrust projects to at least 75.62, but if DXY settles above that number we should expect a renewed burst to a minimum 76.75 (!).

I hung out a 1358.25 target a short while ago, so let's try shorting there with a 1.00-point stop-loss. This is probably more easily done during the night session, since morning could bring a gap-up opening, so take extra care.  There's a quite important target above it, at 1385.50, that should be held in mind as a possible top for the summer.  To my eye, price action at the midpoint strongly supports the viability --and accuracy -- of the target itself.  Please note that if the even larger rally pattern evident in this chart plays out -- i.e., the one starting in the lower left-hand corner -- the futures could go as high as 1415.00.  ______ UPDATE (9:55 a.m. EDT):  Turns out we didn't need the 1.00-point stop-loss, since the futures peaked overnight precisely at 1358.25 -- a dead-center bullseye.  Assuming two contracts were shorted, cover half here, at 1352.75, and use a 1357.50 stop-loss for what remains.  I'm not recommending a trailing stop, at least not yet, because we'll be swinging for the fences on this one.

Something really does stink on Wall Street, and so, like nearly every other trader we know, we’re itching to get short up the old wazoo. And while we would never do so expecting to nail the Mother of All Bear Rally Tops, we’re content to find juicy, perfectly tradable highs at least once or twice a week.  Yesterday, for instance, the E-Mini S&P stalled for four hours precisely where we’d predicted, at 1351.75. Here’s the forecast exactly as it went out to subscribers the night before, when the mini-futures contract was developing thrust from around 1343.00.  Keep in mind that we’d partially covered a short earlier in the day for a theoretical profit and were looking to do it again on the very next thrust:  “Shorts initiated yesterday from near 1345.00 should be tied to a 1349.75 stop-loss. That is somewhat lower than the 1355.25 stop suggested here earlier, but it is also where the five-minute chart would now become menacing.  Please note that the lesser charts are already working on a minor, bullish impulse leg that yields a 1351.75 target and a midpoint at 1347.00.” Imagine what a cheap thrill it was for us to see E-Mini buyers stymied at exactly 1351.75 for most of the day.  With any luck, one of these times we’ll be able to get short, and to stay short, for the rest of the decade.  For now, though, our goal is to “go away in May,” but with a position that will keep on giving through, oh, the Fourth of July. But the real trick is to make money even when we are wrong.  If you’d like to find out how successful we’ve been at this, or how much fun we've had, even when unsuccessful, then by all means ask a Rick’s Picks subscriber