Friday, March 16, 2012

I've set some ambitious benchmarks for gold and silver today for those of you who are wondering what it would take to put bulls back on the offensive. There's also a short recommendation in the E-Mini S&Ps that would effectively reverse the long position we took home overnight on Thursday.

We've always liked Apple stock as a buy-and-hold investment, but this rally is getting a bit silly, isn't it? So much for being one of the few companies in America that appears to be doing just about everything right. It is therefore a must-own for all institutional pmanagers, although even Big Money must regret that it is only rarely that the stock can be shaken down to relative bargain levels. (Another flash crash, anyone?)  From a technical standpoint, the stock's turbocharged thrust past a 590.02 target has put another at 707.69 in play.  In this case, whatever the most egregious, hype-mongering analysts on Wall Street are forecasting for the stock, they'll probably be right.

The Gold Miners ETF seems likely to fall to at least 46.15, the Hidden Pivot target of a clear and compelling pattern that is shown in the chart.  Traders and long-term investors seeking a defensive play should look to get short or covered-write the stock if GDX rallies back to the 52.04 midpoint, which is now resistance.

A Hidden Pivot at 31.230 remains our minimum downside objective, and it would take nothing less than a surge above 34.380 to turn the intermediate-term outlook back to bullish. Moreover, a two-day closed beneath 31.230 would put into play the 29.355 target noted here yesterday.  Look on the somewhat bright side, yesterday's thrust was weakly impulsive on the hourly chart -- "weakly" because it surpassed no true 'external' highs -- and projects to 33.390 via a 32.910 midpoint resistance that lies just two ticks above yesterday's high. From our Hidden Pivot perspective, the most bullish thing that could happen today would be an unpaused thrust that exceeds external peaks #1 and #2.

Yesterday's analysis emphasized the negatives, which still obtain despite yesterday's encouraging bounce.  The rally was bullishly impulsive on the hourly chart (although not obviously so; see inset), yielding an immediate upside target at 1683.30.  The midpoint sibling of that Hidden Pivot lies at 1669.40, which is above yesterday's high; and the 'D' target, too, is just above another, namely the 1682.80 peak recorded Tuesday on the way down. Obviously, this second, 'external' peak is quite important to the near-term picture as well as to our determination of the rally's strength.  The most bullish outcome would be an upthrust today that gets past peaks #1 and #2 without a b-c correction on the hourly chart. But if the futures merely tiptoe up to within a few ticks of 1682.80 and pull back for a running start at it, that would be cause for optimism ahead of Sunday's opening. ______ UPDATE (10:36 a.m. EDT): The futures look feeble so far this morning after rallying no higher than 1664.90 overnight. The benchmarks noted above still apply nonetheless.

We are long a single contract from 1391.25, the result of a trade signaled during yesterday morning's weekly tutorial session. You should be using a "dynamic" trailing stop that will subject you to risk no greater than a third of what you stand to make if the futures reach the target. With a target at 1412.75 and a so-far high of 1397.50, that implies a current trailing stop of 5.00 points, but it would narrow to 4.00 points as the futures approach, for example, 1400.75 (leaving 12 points to the target).   Because the target is a Hidden Pivot that looks like a good place to get short, I'll suggest doing so in either of two ways:  1) via camouflage; or, 2) if you have cashed out the long for an implied profit of $1075 per contract, offer four contracts short at 1412.25, stop 1413.25.  If you use the second strategy, your first partial profit should be taken on a pullback to 1408.75, but you'll be on your own thereafter. _______ UPDATE (10:28 a.m. EDT):  We exited the position this morning at 1396.50, based on the 4.00-point trailing stop that would have been in effect at the so-far high, at 1400.50.  Our profit on paper was $262 per contract before commissions. The 1412.25 target remains valid and is still a good place to try shorting.  Would you like to learn how we use the ‘camouflage’ trading technique to significantly reduce entry risk? Click here for details.

Stocks broke out of a two-day holding pattern yesterday morning and then stalled, presumably to wait for that mote of benign economic news that can be relied on to stir up some short-covering. There wasn’t enough news on the tape yesterday to stir up much of anything, even by Wall Street’s liberal standards. Just an item suggesting that manufacturing in the New York region had “unexpectedly” increased, and another item that had the U.S. and Britain thinking about tapping the ol’ strategic oil reserves to help “calm” energy markets. Fortunately, however, from a trading standpoint, the day was hardly a wash for Rick’s Picks subscribers who attended the tutorial session that we give every Wednesday morning for graduates of the Hidden Pivot Webinar. (Click here for details concerning the  upcoming class, and get a $50 discount.) Students are advised to come to these classes ready to trade, and although we don’t always have an opportunity to pull the trigger during the sessions, a moderate breakout in the E-Mini S&P Thursday morning gave us good reason to act. The pattern we used to initiate a long position is highlighted in the chart above, and the means that we employed to leverage it is called “camouflage” trading. Essentially, this technique entails identifying very subtle breakouts that are likely to go unnoticed by conventional support-and-resistance traders. In this case, we had to zoom in on the 5-minute chart to find a precise “camo” rationale for getting long. Typically, we risk no more than five ticks theoretical, or $62.50, when we get long or short in the E-Mini S&P.  This trade called for a bit more -- $87.50, to be precise – and so we initiated the trade on one contract rather than the usual four. Because one student had purchased five contracts on