by Olivier on February 8, 2010
Markets are not bouncing. As of yet it looks like the preceding decline was not pronounced enough and sellers obviously are not exhausted. The hammer reversal candles that are all over the place have not been invalidated but the longer it takes for the markets to bounce the less likely we’ll eventually see a bounce at these levels. No need to rush things.
With lots of charts the path of least resistance is now down. A chart that comes to mind and that I’ve annotated accordingly is TSL – Trina Solar. This looks like a clearly defined bear flag. The price target should be in the 18.00 area if the flag is resolved to the downside. TSL is still one of the strongest chart within the Solar Sector so caution is warranted.
Up-to-date TSL – Trina Solar Price Chart on my public list.
If you don’t want to go short in order to make money the current market environment should at least be telling you to be extremely cautious with long positions. Hence my very conservative long exposure I have been writing about for about 3 months. I am still willing to go long a few select stocks but I am certainly not pushing it.
A few things to keep in mind:
- You don’t need to be in the markets all year long to make big money.
- You don’t need to trade every day.
- The big money is made with a few single trades.
- Money comes in bunches.
- A huge part of trading consists of observing, analyzing, sitting on the sidelines and waiting until great opportunities arise.
- There are times to be aggressive and there are times where you should sit on your hands.
Wait for a good one.
Have a great evening!
by Olivier on February 7, 2010
My last post was about ‘hammers’ that were printed on Friday. It remains to be seen if a bounce can develop and how meaningful it will be. After doing some more research and viewing hundreds of charts I thought a more in depth analysis of currencies and their relationship would be appropriate. It is obvious the Euro and the US Dollar have an inverse relationship. In order to gauge the strength of the US Dollar rally it is therefore imperative to analyze further potential Euro currency weakness.
Looking at the daily and weekly Euro price charts it seems to be the prudent thing to expect a bounce from these levels. Technically speaking the Euro is hitting strong support around the 135 level. The daily chart suggests a move testing the moving average 200 is a high odds expectation as the ABC correction should now be complete. We might have witnessed sellers exhaustion. The hammers in Gold, Silver, AGQ – ProShares Ultra Silver ETF, and the Euro chart pattern will put a lot of pressure on the US Dollar bulls in the immediate future.
Up-to-date Short Term Daily Euro Price Chart on my public list.
Up-to-date Long Term Weekly Euro Price Chart on my public list.
Overall the long term charts and the technical picture of the Euro still look much stronger than the US Dollar. We still have huge overhead resistance with the US Dollar. A while back I outlined technical price targets for the US Dollar.
Up-to-date Short Term Daily US Dollar Price Chart on my public list.
Up-to-date Long Term Monthly US Dollar Price Chart on my public list.
Keep in mind to be mentally prepared for unexpected US Dollar developments and vicious rallies. The markets have a tendency to trap the majority. Protect yourself in case your analysis is wrong and the worst case scenario unfolds. Also keep in mind the fact gold made new highs while the US Dollar didn’t make new lows technically speaking has to be interpreted as US Dollar strength.
“If it’s obvious, it’s obviously wrong.” Joe Granville
Have a great weekend!
by Olivier on February 6, 2010
Today was reversal galore. Lots of stocks printed reversal candles. For those of you familiar with candlestick theory ‘Hammers’ were printed. The term hammer is used because of the underlying psychology of the chart pattern. Price is literally ‘hammering out’ a bottom and as support is tested and holds it leaves a candle with a long tail on the charts. A simple trading strategy is to go long the next day if the stock opens or trades above the high of the day the hammer was printed. A sound stop loss would be below the tail of the hammer. Of course it is not really that simple. In order to identify valid or tradable hammers you need to analyze a few more things:
- Was there some kind of blow-off capitulation type volume?
- Has the decline of the stock lasted long enough?
- Are there other clues within the chart (e.g horizontal support trend lines, retracement levels etc.) telling you the support level is sound?
I think all of the above mentioned factors are met. AGQ – ProShares Ultra Silver would be just one example to illustrate what I look for when I try to identify valid reversals:
Up-to-date AGQ Silver ETF Chart on my public list.
It looks like I might buy a few more positions if we indeed witnessed a sustainable reversal pattern. It is still too early to tell. We need follow through and as I’ve stated for quite a while now there is no need to rush things. My plan going forward is to further reduce my MXI.V – Merrex Gold position which has now become so small it can’t hurt me. On the other hand I am looking to further increase my MRZ.V – Mirasol Resources exposure should the stock take out the 2.50 level. Looking back RVS.V – Riverstone Resources and VTR.TO – Volta Resources would have been better West African Gold Mining Stock choices. That’s simply business as usual. Hindsight is always 20/20. The only thing you can do is to monitor your open positions and to: Kill your losers and push your winners.
Patience is a virtue.
Have a great weekend!
by Olivier on February 4, 2010
What a difference a few days make. Gold couldn’t take out the lower high and wasn’t able to hold above the recent lows. Technically speaking we are in a downtrend as gold printed lower lows. A look at the big picture still makes me believe we are experiencing an orderly correction. Thus, I would still label the last two months’ action as a consolidation or sideways pattern.
Up-to-date USD$ Gold Price Chart on my public list.
That being said, especially the big cap mining stocks don’t look good and have way too much overhead resistance. Some mid tier stocks like LSG.TO – Lakeshore Gold (merger with WTM.TO – West Timminis Mining) just look plain ugly. This is the perfect time to be very conservative with your long exposure and to see which ones will be the outperforming stocks during the next up-move. As I’ve stated in the past, I believe this down move will separate the wheat from the chaff.
The stocks that are displaying great strength and ’salmon like behaviour’ during down moves are the ones to keep an eye on. They offer the best odds to be the new leaders when the markets turn. Here are a few that come to mind:
- CRK.TO – Crocodile Gold: Trading near its all time high and didn’t give back much today.
- MRZ.V – Mirasol Resources: Holding up extremely well and not much selling pressure so far. Stock has almost no overhead resistance.
- FIS.V – Fission Energy: One of the few that were actually up on a day everything got killed. One of the reasons I added an additional Uranium Sector Overview Chart to my public list. Although U.TO – Uranium Participation, which basically stands for the price of Uranium, is clearly not in an uptrend some stocks in that sector are moving up and bucking the trend.
- KIV.V – Kivalliq Energy: Same story. Stock is bucking the trend and not following the price of Uranium. Lumina Capital, Ross Beaty, took part in the recent private placement. I will probably write more about KIV.V soon.
- BGC.V – Brazilian Gold: Strong stock. Holding up extremely well.
- RVS.V – Riverstone Resources: Great thrusting move. I am waiting for a consolidation. Stock looks promising.
- MMR – McMoran Exploration: This one is building some nice pressure. The stock is very liquid and I believe it will offer great long entry opportunities in 2010. Especially for those who want to trade bigger US-listed stocks.
- PL.V – Pan American Lithium: Holding up well. Right now technically one of the best charts in the Lithium Mining Stock Sector.
I may sound like a broken record but I am not advocating to go long aggressively. I am being very conservative with my overall market exposure. Do not trade because you crave the action. The goal is to make money. Not more not less.
Be patient and wait for great opportunities.
Have a great evening!
by Olivier on February 2, 2010
by Olivier on February 1, 2010
Gold along with silver bounced today and didn’t print a lower low. As implied by the headline I chose this means we witnessed first signs of technical strength. Not more not less. Technically speaking we are still in a lower high trading environment. Unless gold can take out the lower high it printed in January 2010 at around 1,150 we are by definition in a sideways trading movement.
That being said, a great way to gauge strength of a particular sector or a specific stock is to compare a stock’s price action with your expectations. Lots of traders expected gold to sell off hard and retest at least the 1,000 US Dollar level. It could still do that. But for now it is displaying more strength than sentiment was implying. Odds therefore are it will continue to behave that way and surprise with moves to the upside as long as the recent low is not taken out.
Up-to-date USD$ Gold Price Chart on my public list.
My game plan so far this year has been to be very conservative and to only put on a few positions in stocks that from a technical perspective I deem to be extremely strong. These stocks can still move to the upside and make new highs all the while their underlying – in this case gold and silver – is moving sideways and not making new highs. I still don’t think it is a good time to be overly aggressive. It is a great time though to watch how specific stocks of interest do behave. This is a period in the resource stocks sector that should separate the wheat from the chaff. Stocks trading near their 52 week high or at all time highs when this consolidation period is over will have the potential to explode to the upside. If gold doesn’t move ahead and print new all time highs being in the strongest stocks simply offers the best protection for your capital.
A good example for a stock worth watching would be CRK.TO – Crocodile Gold.
Up-to-date CRK.TO Crocodile Gold Chart on my public list.
It did well today and reacted very well to the bounce in gold. That’s typical trading behaviour for strong stocks. I am adding and removing stocks to my public list accordingly. Good stocks make it on my list. Weak stocks get dumped.
Stay focused. Avoid information overkill at all cost.
Have a great evening!
by Olivier on January 28, 2010
Just finished updating my public list and thought I’d do one of those review posts where I simply write down a few thoughts that come to mind when going through the strong stocks I monitor on my public list and in the background. Scanning for above average volume still generates some interesting stock trading ideas with great potential but overall I see lots of weakness in the markets. As I’ve been stating for weeks I am being very conservative regarding my overall market exposure and I am in no hurry to open new positions like crazy. On to the charts:
- MRZ.V – Mirasol Resources: Best chart I can find right now. Added to my position today.
- RVS.V – Riverstone Resources: Newest addition to my public list. West Africa, a theme I am very bullish for 2010. Volume is pumping. Waiting for a consolidation.
- TAO.V – Tag Oil: Recent public list addition. New Zealand oil and gas play. Great looking chart. Closely watching that one for possible entries. I think it needs more time to build pressure before it can stage a sustainable move to the upside.
- MMR – McMoran Exploration: Excellent looking chart. This one will probably offer lots of great trading opportunities in 2010. Consolidation needs a bit more time to build a decent flag pattern.
- VTR.TO – Volta Resources: West Africa. If the stock can trade back into the triangle pattern it will be a great sign of strength.
- PL.V – Pan American Lithium: Recent public list addition. Technically speaking the best looking chart in the Lithium Sector. The rest of the pack is starting to get weaker. WLC.V – Western Lithium needs to prove itself soon. Otherwise the whole lithium sector may suffer.
- MEX.V – Midlands Minerals: Excellent looking chart until the recent private placement at 0.35 was announced. Stock needs time to digest that. Patience.
- MXI.V – Merrex Gold: Today’s long tail might have been a shakeout of weak hands. Stock needs to confirm that assumption and move up soon though.
- ASYS – Amtech Systems + ALN – American Lorain: Two stocks that are not on my public list yet. Watching them in the background. Charts look rather good and the stories have decent potential. The charts will guide me.
I’m going to go where the markets take me.
Have a great evening!
by Olivier on January 27, 2010
What a difference a day makes. Today’s price action with MRZ.V – Mirasol Resources made the decision on what to write about tonight a very easy one. Yesterday I outlined different scenarios I see for MRZ.V’s future price development. I didn’t expect the stock to mount such an impressive rally the very next day establishing that important new trading range.
The key point here is ‘expectation’. I do not let my entry prices cloud my judgement. I couldn’t care less about picking bottoms and selling tops. What I do care about though is a stock’s trading behaviour. I analyze a stock and after watching it for a while I draw conclusions. If the stock is acting right I open a position. Then the real work starts. I have clearly defined expectations how strong stocks are supposed to behave. My job is simply to monitor the stock’s action after I put on my position. Depending on a stock’s ability to match my expectations I reduce or add to my position.
To make a long story short: My decisions depend on a stock’s price action, not my beliefs.
Up-to-date MRZ.V – Mirasol Resources Chart on my public list.
MRZ.V has surpassed my expectations. Put another way, the stock has proven itself and is making me money. I am now willing to add to my position whenever good opportunities arise. MXI.V – Merrex Gold on the other hand has not proven itself yet. Winning traders don’t average down. There is simply no way I am going to break that trading rule. I will only buy more if the stock moves up above my entry price. If the stock keeps going down I will further reduce my exposure. Let’s see what happens.
Be very patient with your winners, they take care of themselves.
Buenas noches!
by Olivier on January 26, 2010
Decided to write a bit more about my thoughts and what I see looking at the MRZ.V – Mirasol Resources chart. In a previous post I was talking about the new trading range MRZ.V is trying to establish. The stock has subsequently dipped further down into the gap zone than initially expected. Today the stock was able to print a few trades around the 2.00 level. It is very tough to decide how overhead resistance above the 2.00 level will influence the stock’s trading behaviour going forward. I do not consider all the trades after the recent gap to be distribution as volume wasn’t overly excessive. We didn’t even come close to see blow-off type volume. Due to the lack of huge volume after the recent gap, technically speaking this increases the odds we witnessed a continuation gap indicating we have further to go until the stock tops out. Exhaustion gaps typically occur when euphoria reaches extreme levels. It is usually a last gasp up which coincides with short sellers giving up and covering their position. I don’t see that with MRZ.V.
Applying technical analysis is not about finding the holy grail. It is a means to gauge odds and to increase one’s discipline. It is also a great way to identify winning stocks. So far MRZ.V still fits the criteria of a winning stock with the potential for future price increases. It will soon be decision time. The longer it takes for the stock to move up again the lower the odds my assumptions will turn out to be right. Trading has nothing to do with loyalty. If a stock doesn’t behave well and doesn’t make me money my job is to get rid of it. No hard feelings. Plenty of other stocks out there. Also review Ed Seykota on trend trading. This will reinforce good trading habits.
Up-to-date MRZ.V – Mirasol Resources chart on my public list.
Conclusion: I still think MRZ.V – Mirasol Resources has the potential to develop into a huge winner in 2010. The next bounce in the resource stocks sector will separate the wheat from the chaff. Closing above 2.20 would roughly correspond to a 10% move to the upside. That would take care of overhead resistance. The stock needs to show its hand soon. A close above 2.00 would be the first step. Let’s see what happens.
When a stock doesn’t move as expected, get out. No hard feelings.
Have a great evening!
by Olivier on January 25, 2010
After doing my research during the weekend I would have expected the markets and my two positions MRZ.V – Mirasol Resources and MXI.V – Merrex Gold to bounce today. It really comes down to being in sync with the markets and the stocks you are trading. Your personality needs to match a stock’s personality. In order to trade at peak performance and experience a flow state of mind where you can execute flawlessly, a stock needs to behave well. Forcing trades never generates great results. Put another way, a stock needs to trade the way you would expect it to trade. Whenever that’s not the case this raises a red flag.
A few reasons that come to mind why a stock doesn’t match your expectations:
- You might not be trading well.
- You are misjudging a situation.
- The stock has a ‘weird’ personality.
- The stock you are in simply turns out to be a losing trade.
That being said the markets and my two positions are not bouncing as expected and I don’t see any compelling reason to aggressively go long. Since the beginning of 2010 I have been very cautious and very conservative as far as my overall exposure to the markets is concerned. Missing an opportunity is never a problem. The markets offer plenty of them on an ongoing basis. What can hurt you though is big losses. Most of the time they happen due to greed. To be more precise, greed is simply a variety of fear. The fear of missing out on a stock moving up which by the way is closely related to to the fear of selling at a loss. If you want to be successful in the long run it is never a problem to miss out on a good move as opposed to losing money. That’s why I decided to sell a bit and further reduce my exposure. Long term readers know I do not send out newsletters when I trade around a position but post about those trades on my website. Still I decided to update my newsletter section for new readers.
The markets are very difficult to read and my gut feeling tells me it is a good idea to be very conservative. When I look back and visualize all the situations where I had the exact same feeling it turns out it often was during distribution phases in the market. Unless you are an active trader this is not the time where big money is made.
Better be safe than sorry. Avoid big losses at all cost.
Have a great evening!
