As we went to press Monday night, February Gold was fixing to stop out a bullish position we’d advised that produced explosive, although perhaps fleeting, gains. For subscribers who acted on the initial recommendation made here last week, there was a theoretical profit of nearly $6000 per contract at recent highs near $1767. (Click here for a free pass to our daily recommendations and forecasts.) But because we had resolved to stick with this bullish play and swing for the fences, we watched passively as bullion quotes receded back into the by-now-familiar muck of uncertainty. To be sure, our position will survive if the futures trade no lower than 1716.20. But we’re not counting on it. And if gold were to trigger the stop-loss and continue south, the next place we might consider bottom-fishing would be near 1702.60, a “Hidden Pivot” support determined by our proprietary forecasting method. » Read the full article
Gold was getting socked early Tuesday morning as we went to press, down as much as $23 a short while ago. This was well beneath the protective stop-loss on our single-lot position, and it will put into play a 1702.60 pivot that can be bottom-fished with caution.
The last few rally patterns on the hourly chart have reached their ‘D’ targets, so the worst we should be right now, short-term, is neutral. And yet, it’s hard not to be rooting for the stock market to drop-the-hell-dead, since it will take nothing less than that to start Wall Street on the long, long road back to integrity. Under the circumstances, and so that we don’t come to the races on Tuesday with no horse to bet on, let me suggest using the 1241.00 target shown as a telltale whose breach would earn just a little respect for bears. Bottom-fishing near 1241.00 using ‘camouflage’ is recommended, since a print at that price will be viewed by our competition as a breakdown beneath Friday’s 1242.00 low. What do we care if we can test the water without getting wet.
A subscriber reported success yesterday legging into the 1340/50/60 August 16 call butterfly that I’d advised. He did so 32 times at no cost, as suggested, but it took a $10 move in the stock between legs to get filled so advantageously. His maximum profit would be $32,000 with the stock trading at 1350 come August 16. Since he owns the position without cost, no loss is possible even if PCLN should all to zero or rally to $1000. We’ll do nothing further for now, but I’d suggest that those of you who were unable to buy the spread keep trying. We’ll shoot for a partial profit if the stock rallies $40-$50 in the next few weeks but otherwise do nothing further. I’ve reproduced a chart that shows why our expectation of a $120 rally from current levels, to a 1358.18 Hidden Pivot target, is not exactly farfetched. To that end, a pop above the 1270.59 midpoint pivot would be most encouraging.
I’m tracking a single contract short from 1982.50, based on the following post by me in the chat room at 1:45 p.m. EDT: “Aw, screw it. Just for the hell of it, let’s offer a single contract short at 1982.50, stop 1985.25, risking a theoretical $137.50 plus commissions. I’d hate myself if we actually missed a great short up here.” Actually, it looked like we had missed the short, since I’d suggested initiating it at a longstanding Hidden Pivot target at 1984.25 that was missed by three ticks when this vehicle topped for the day at 1983.50 in the first hour.
The futures subsequently crept back up to 1982.75 later in the session, and it was then that I advised getting short for the hell of it. We remained short at the bell, but anyone who did the trade is advised to monitor it overnight, and to use the 1985.25 stop-loss suggested. That implies that we are risking a theoretical 2.75 points to stay in the trade. If we use the fixed risk:reward of 1:3 that I always advise, we need a move our way of at least 8.25 points, to 1974.25, before we implement a trailing stop. (Had we initiated the trade with multiple contracts, we would take a partial profit there on half the position.) I may suggest an impulse leg-based stop-loss if ESU falls straightaway to 1974.25, so stay tuned to the chat room if you’re unclear on how to do this. It is my intention to come out of this trade with at least a small profit even if ESU blows higher, as is likely. That will be possible if we get the pullback to 1974.25, since a 1981.25 stop-loss would become automatic at that point, subject to the substitution of a trailing stop. Meanwhile, I’ve reproduced an hourly chart (see inset) that shows the sinewy perfection of the pattern we’ve used to get short just beneath its 1984.25 Hidden Pivot. ______ UPDATE (July 24, 11:49 a.m. EDT): The futures have exceeded our stop-loss by just two ticks so far today, but we exited anyway to stick to our discipline. The loss was about $138, and we won’t look back.
I haven’t tracked currencies that closely, but because they tend to move very precisely to Hidden Pivot targets, traders should consider exploiting them whenever possible. Notice how EUR/USD has broken beneath a midpoint Hidden Pivot at 1.34841 after noodling around near that pivot for a few hours on Thursday. This suggests that it is bound for D=1.34197, at least. You can bottom-fish there with a stop-loss as tight as 3-4 ticks. Notice as well that there are two slightly higher possibilities for point ‘A’. The correction targets they yield lie, respectively, at 1.34114 and, worst case, 1.33992. I expect these numbers to work very precisely, so use them in whatever way suits you best. Note as well that a last-gasp rally to p=1.34738 after EUR/USD has fallen a bit would be short-able.
The futures looked like they could go either way as Monday’s session drew to a close. However, the stall within 0.70 of the 1318.30 midpoint resistance I’d flagged implies that a decisive move past it would reach its D-target sibling at 1331.60. Alternatively, my worst-case target for the near term would be the 1278.20 Hidden Pivot support in the lower-right quadrant of the chart — or possibly even 1271.70 if any lower. The accuracy of this target would be affirmed by a bounce, possibly tradable, from within two or three ticks of the 1302.00 midpoint support. ________ UPDATE (9:57 a.m. EDT): Gold has bounced $14 this morning from a low just two ticks (0.20) from the 1302.00 midpoint pivot flagged above. Now, if the futures breach the support, we’ll know EXACTLY where they are headed. _______ UPDATE (July 23, 12:01 a.m.): Someone in the chat room said that because everyone seems to be bearish on gold right now, perhaps we should take the other side of the bet. I’m a bit bearish myself, and thus this response: “Rather than take chances and let gold disappoint us for the zillionth time, we should simply stipulate that the August contract close above 1318.90 before we get excited. That’s the midpoint resistance, on the 180-minute chart, of a=1292.60 on 7/15; b= 1325.90 on 7/27; and c=13-02.20 on 7/22. At that point, I’d lay even odds of a move to at least 1335.50; above 1337.00, the futures would be a good bet to hit 1381.40. Whatever happens, bulls will have to prove their case. _______ UPDATE (July 24, 1:20 a.m.): Sellers paused for a relatively blissful nine hours yesterday just inches above the 1302.00 ‘hidden’ support I’d flagged, presumably to sniff the flowers before going back on the attack.
Netflix’s so-far $37 selloff has followed a peak last week at 475.87 that slightly overshot a Hidden Pivot at 474.50 I’d characterized as ‘a big-picture target where an important top is even more likely.’ A chat-roomer who evidently took this prediction to heart reported buying puts last Thursday for 1.24 that he cashed out for 8.90 yesterday. This could be just the start of NFLX’s comeuppance for all those who inflated this gas-bag to undeserved heights. If you took a position and are still holding it, please let me know in the chat room and I will update guidance. For now, though, let me suggest that you take profits on half of any short position entered near the recent top. _______ UPDATE (July 10, 10:23 p.m.): Bears failed to achieve a Hidden Pivot target yesterday, presumably because DaBoyz shook the stock down so hard on the opening bar that it exhausted sellers prematurely. The missed target suggests that traders will enjoy decent odds bottom-fishing the midpoint pivot shown at 433.62 (see inset, a new chart) with a stop-loss as tight as 8 cents. If it’s hit, expect the selling to continue down to at least 423.05, a Hidden Pivot that can be bottom-fished with as tight a stop-loss as you can abide. _______ UPDATE (July 14, 11:07 p.m. EDT): A turn from 428.20, precisely between the two pivots flagged above, left our bid high and dry. The bull leg that has followed could be the start of a rally cycle with the potential to reach 486.86. First, though, let’s see whether buyers can tackle a midpoint pivot at 457.53 that is associated with the target. _______ UPDATE (July 16 at 6:47 p.m.): Let’s not overlook the downside — specifically, the 433.69 midpoint pivot and its D sibling at 411.67. Bears can short the break for a move to either, and both can be bottom-fished with the tight stop-loss you can abide. ______ UPDATE (July 22, 12:15 a.m.): The stock turned higher from $2 above the midpoint support, implying that bulls are about to dominate once again. Call prices are on the moon, however — way too expensive for a straight directional bet. Instead, I’ll suggest buying the August 2 – July 25 calendar spread eight times for 1.50, day order, contingent on the stock trading 451.00 or higher. Please report any fills in the chat room. _______ UPDATE (July 22, 12:05 p.m.): With today’s huge air pocket, the stock obviously remains in the grip of DaBoyz. My assumption will always be that steep declines in NFLX are brazen shakeouts, engineered by strong hands to steal stock at fire-sale prices from weak hands. In this instance, the downdraft appears likely to hit 413.00 before DaBoyz run it up again. If and when that number is hit, you can bottom-fish there with the tightest stop-loss imaginable. (Note: I’ve revised the target downward by 0.96 since the original update. Also 435.25 is the midpoint pivot and therefore worth a tightly stopped short on a rally to it.)