Thursday, May 10, 2012

We hold 200 shares with a profit-adjusted cost basis of 18.90.  Lest you grow complacent because we have such a fat cushion built into the position, let me broach a worst-case, bear-market target that I haven't mentioned before because it seemed implausible in the context of a corrective downtrend.  The number, a Hidden Pivot, is 13.90, and we should treat it with respect if for no other reason than that the point B low of the pattern from which its derived is so unsausage-like. Neither does the target look so farfetched when you rescale the chart so that the void between here and it is fully revealed. ______ UPDATE (May 11, 3:00 a.m. EDT): I've recommended straddling the QQQs today and I'm going to suggest doing it in this vehicle as well, since we've got a nice cushion to work with. With June Gold down $13 at the moment, however, GDXJ could start the day with a gap-down opening that would give DaScumballs license to rape market orders to buy puts, especially out-of-the-moneys.  Accordingly, I'll recommend bidding 0.90 for two June 20 puts, taking 15 cents' discretion. You should sit out the opening and then work your bid according to market conditions, trying your darndest to resist paying no more than 1.05 no matter what. _______ UPDATE (Sunday): The puts were an easy buy for 0.90 if you sat out the opening as advised.  We now hold 200 shares (or a multiple thereof) for 18.90 against two June 20 puts for 0.90. The hedge leaves us net long the equivalent of about 56 shares with underlying trading near $20, but this "backspread" will make us automatically shorter if GDXJ falls. _______ UPDATE (May 15, 1:07 a.m.): If GDXJ doesn't get traction here, near a 19.46 Hidden Pivot target (240m, A=38l23

We hold two June 40-42 call spreads acquired months ago whose cost basis after some earlier profit taking has been reduced to zero. Odds that the position will produce a profit are close to nil, but I'll keep it open nonetheless, since we may try to augment it now that we've blown out our small stock position. Unachieved targets below are at 23.70, an important Hidden Pivot that comes from the weekly chart; and at 24.79, a bottom-fishing number derived from the pattern shown. _______ UPDATE (May 13, 8:20 p.m. EDT): Last week's selloff fell just shy of generating a bearish impulse leg on the weekly chart. The actual low was 25.57, but it would take 25.34 to exceed a key 'external' low recorded on the weekend ended on October 22, 2011. Regardless, the two downside targets given above remain valid.

Wednesday's selloff overshot the 28.895 downside target of the compelling pattern shown, telegraphing more weakness ahead. Also, like June Gold, July Silver futures has yet to bounce energetically enough to create a bullish impulse leg on the hourly chart. These signs lend weight to the 28.100 target shown as a likely place for a tradable bottom. Camouflageurs should start to look for a subtle reversal pattern on the 30-minute chart from 28.835 on down.  If your aim is to get short, use minor-degree, downtrending ABCs that are as subtly impulsive as the ones we've used on the way up.

Thursday's tout for June Gold is packed with subtle signs to watch for, but the bottom line is that lower prices appear likely. Although we hold long positions in GDXJ and QQQ that are comfortably in-the-black, we won't let ourselves get caught  napping if this week's selling should start to snowball.

There are several unfulfilled targets beneath yesterday's low that I expect to be achieved (i.e., 1574.30, 1564.70 and 1534.30). This could happen sooner rather than later, since, as of late Wednesday night, the futures were having difficulty distancing themselves from the 1578.50 bottom hit early in yesterday's session. The so-far high of the rebound has fallen $2 shy of the 1598.10 midpoint resistance of the minor bullish pattern shown, and buyers seem disinclined at the moment to try again. Still, they haven't yet thrown in the towel, since this evening's duel between bulls and bears has left bulls in slightly better position for the wee hours.  That would change, however, on a 1587.00 print beneath a subtle low visible in the chart.  Bulls could take heart, however, on a push above the 1609.oo 'external' peak made yesterday afternoon on the way down.

The bounce from yesterday's stage-managed low was picking up speed in after-hours trading.  However, as of 10:38 p.m., buyers were stalled at the 1356.50 midpoint resistance of the pattern shown.  Because the so-far shallow pullback is from a legitimate point 'B' high of a bullish impulse leg, there may be an opportunity for night owls to get long via camouflage to a presumptive 'D' target at 1367.25.  The chart shows which pattern to use. _______ UPDATE (12:44 p.m.):  The tradable pattern I'd sketched never developed; instead, the futures spent the night screwing the pooch.  When the opening bell rang, the best Da Dirtballs could muster by way of a short squeeze was 1363.75, a dubious noon-achievement that will put the futures in limbo, probably, till the final hour.

Gold has been testing the limits of our endurance lately. A week ago, when we tried to buy shares of GDXJ, a proxy for junior mining stocks, it ran away from us, seemingly headed into the wild blue yonder. At nearly $24 a share, it was difficult to justify jumping aboard, since, just a couple of days earlier, we’d blown an opportunity to do so at a bargain-basement price of 21.52. We sat tight nonetheless until yesterday, when GDXJ dove into our lap, then trampolined off a 19.66 correction target that had been spotlighted in the “trading touts” section of Rick’s Picks a month ago. Here’s the recommendation exactly as it went out to subscribers the night before, with GDXJ settled at 21.09:  “An important [Hidden Pivot] target at 19.66, last mentioned here on April 5, appears to be this vehicle’s immediate destination. I’ll recommend bidding for 400 shares at 19.75, no stop-loss, day order. Camouflageurs can start looking for the turn now, seizing the advantage if it should present itself.” The chart tells the rest of the story.  GDXJ made its intraday low at 19.62 in the opening minutes of the session and never looked back. And  neither did we.  An hour later, with the stock on its way to a remarkable 8% gain from the low, we told subscribers to take a partial profit. Here’s the advice we sent out via an intraday alert: “Our longstanding target has caught this morning's 19.62 low nearly perfectly, allowing us to buy 400 shares at the suggested price. Now, on a good-till-canceled basis, offer 200 shares (or half of the position if you bought more than 400 shares) to close for 20.60.”   Any subscriber who did so would now be sitting on 200 shares with a cost basis reduced by profit-taking