April 2012

Gold came down hard for a second straight day yesterday, but for all the wrong reasons. That’s why Rick’s Picks subscribers were ready to seize the opportunity with distress bids in two popular gold mining vehicles. One of them, GDX, the Gold Miners ETF, fell to within 14 cents of a 46.15 target that had been disseminated to subscribers a month ago when the price was in the high $50s.  So far, the recommendation is looking like a winner: by day’s end, with GDX settled at 46.71, the paper position was 68 cents in-the-black. The other recommendation involved GDXJ, an ETF comprised of smaller mining companies. This vehicle plummeted yesterday to a 22.74 target that had been promoted to our subscribers as a “back-up-the-truck” number when the stock was trading closer to $25. And although GDXJ fell yesterday a bit lower than we’d forecast, hitting 22.39 intraday, the bounce into day’s end brought it back to a high of 22.85 and a settlement just two cents below that.  Give it a little rest overnight, and we expect GDXJ to bolt from the gate on Thursday, the last trading day of this holiday-shortened week. Even so, we’ve instructed traders to place protective stops not far below where they got long in order to minimize exposure if GDX and GDXJ relapse to new lows. [Want to get in on our next trade via a real-time e-mail alert? Click here for a free trial subscription to Rick’s Picks that will give you that and much more, including access to our 24/7 chat rooms.] So what about our assertion that bullion and mining shares fell for all of the wrong reasons? The selloff began on Tuesday when minutes from the last Fed meeting were released. Apparently, the minutes contained no explicit word that the

Stocks and precious metals were getting pounded, so we looked for bottom-fishing opportunities in real time in some of the more popular Rick’s Picks trading vehicles. Using the intraday charts, we trained our attention mainly on the E-Mini S&Ps and on two mining-stock ETFs, GDX and GDXJ. Both were hitting downside targets that had been drum-rolled in the newsletter weeks ago and in which there were working buy orders that morning. We also scrutinized the lesser charts for a possible ‘camo’ trade in the E-Mini S&Ps that went against the day’s selloff.

It'll require diligent attention to reboard this vehicle, a fact that I've illustrated with the very subtle (but picture-perfect) camo pattern shown in the chart.  Our next such opportunity would necessarily be less subtle, since it would entail a b-c pullback from above the obvious peak (#3) at 23.96.  Still, because we can't get hurt much trying, I'll suggest boarding whatever uptrending abc pattern unfolds that includes a marginal upside breach of external peak #3 and a b-c pullback. _______ UPDATE (10:46 a.m.): In the chat room, several subscribers have reported buying the stock using bids based on the 22.74 target flagged here about two weeks ago.  Accordingly, I am establishing a 400-share tracking position @ 22.80 for your further guidance. I've also put out a bulletin recommending the purchase of August 23.63 calls. Use a 1.80 bid with 0.05 discretion.  This means you can pay up to 1.85 for them.  Please note that they are illiquid and only a dozen have trade so far this morning. The market makers are quoting a 10-cent spread and the calls are not likely to trade them on the bid, so you may have to pay up 0.05 to get some.  For now, because the 22.74 target was so clear, I am suggesting no stop-loss on either the stock or the options.

June Gold is too close to the 1629.80 bottom recorded on March 22 to be attractive for bottom-fishing, but the futures are nonetheless tradable via camouflage on charts of leastmost degree (see inset).  Although there is no Hidden Pivot rationale for attempting it at these levels, the structural reason (i.e., 1629.80) is sufficiently compelling to try. However, to give you an idea of how extremely subtle the bullish abc that you board will need to be, I've marked out one such gambit on the chart that reached 'p' but not 'd'  (it was therefore, according to our rules-based terminology, a 'successful' trade although not a 'winner').  The fact that it did not get to 'd' even though there were no structural impediments to block the last few upticks is sufficient reason to infer not only that bulls will need to be careful, but that they will be bucking underlying weakness, at least for the near term.

A 33.730 rally target identified here yesterday remains valid in theory, but as a practical matter and for the time being, we ought not pay it much mind. Instead, I'll recommend bottom-fishing at the 31.855 downside target of the pattern shown. This Hidden Pivot is nicely located in the middle of nowhere, just as we like 'em,  but camouflage should be used nonetheless to reduce risk.  Using a chart of 5-minute degree or less, camouflageurs should start looking for an uptrending abc reversal to leverage if and when the futures come down to 31.875.  I'll establish a tracking position for your further guidance if 1) the perfect entry opportunity arises; and 2) someone in the chat room reports actually having done the trade.  Click here for information about the upcoming Hidden Pivot webinar and a coupon good for a $50 discount.)

Try a Hidden Pivot at 1394.25 (A=1414.25, 30m) for bottom-fishing if you get bored, but note as well that the point 'B' low here is low-grade sausage and therefore hardly conducive to creating a precisely tradable low. Also, because the futures are trading almost exactly where they were three weeks ago, we shouldn't have any illusions about easily catching the breakout toward some aging targets above these levels noted here earlier.

Assuming the selloff in bullion was as gratuitous as the one that occurred yesterday in stocks, we may have a chance to buy at better prices than obtained a few days ago. Accordingly, I've proffered actionable touts for today not only for June Gold and May Silver, but for GDXJ, the Junior Gold Miner ETF that we exited a while back with the intention of repositioning at a better price. The charts accompanying each of these vehicles will give you an idea of how subtle an entry pattern we're looking for in order to keep buying risk as low as possible in a falling market.

It was while under the influence of LSD that a childhood friend of ours decided to end a promising career as a commodity trader.  He was buying and selling pork belly contracts at the time but dropped acid one day hoping to gain valuable insights into the markets -- insights that presumably lay beyond the grasp of rational thinking.  Chuck had insights all right, but not the kind he’d expected.  Instead of having potentially profitable spreads, combos, strips and straddles leap out at him from his trading monitor, his febrile mind was overwhelmed by images of the slaughterhouse -- of 400-pound sows dripping blood from a conveyor belt. The experience was cathartic enough that his next job, announcing professional basketball games, was as far from the feedlots and butcheries as he could get. We mention this because market-watching has become all-too-abstracted for us lately as well. Ponder the whys and wherefores of the stock market for too long and you begin to believe that investors are being led, one rally at a time, to the slaughterhouse.  Or so it would seem. Europe’s bailout, for one, is a hoax that can only end badly for us all. And the torrent of lies that have kept the U.S. out of statistical recession are so egregious that a bust of 1929 proportions could occur literally overnight and at any time.  As we know, the mindless herd can have epiphanies just like individuals. Except that they are called panics. And yet, stocks continue to ratchet higher most of the time, pausing only long enough to allow sector rotation and the orderly flow of money in and out of the flavor-of-the-week asset class. We've Had Our Warning Someone in the Rick’s Picks forum described this yesterday as musical chairs, and we would agree. The remark

A nasty three-day selloff was recouped in mere hours recently, implying that the stock is still well-controlled by those who have engineered the nasty but always fleeting dips. Since the longer-term charts project to Never-Neverland, let's use the 654.79 target on the hourly (see inset) as a minimum upside objective.  Note as well that a B-C pullback from just beneath the recent all-time high at 621.45 could set up a low-risk buying opportunity via camouflage. The particular appeal is that many bulls and bears are probably scared witless at these heights._______ UPDATE (April 13): From a high of 644, Apple has fallen 6% this week, and now the decline has created a bearish impulse leg on the hourly chart.  Would it be the end of the world if Apple's fabulous run has ended?  Actually, yes -- at least if you're a portfolio manager, since the stock is so heavily owned by institutions.  It would need to drop a further $7 to 'go impulsive' on the daily chart, but for now we'll give it the benefit of the doubt.