No new purchases for Monday as I will be taking off Monday – Wednesday next week
The markets are blowing up in what appears to be a strong correction to the recent downward movement, but BEWARE! You’ve seen how I lost on multiple positions simultaneously this month, I was a few days early trying to take advantage of this reversal, but there is also another mistake I hope none of you make. Don’t take on multiple positions when everyone is moving in the same direction! You are essentially over leveraging if they move in sync against you. Try to pick the best trade setup out of all the markets and go with that.
Also, you also saw how I had 3 positive trades this month that would have been worth 15% or more each, but I gave up all the profit holding on overnight. Be careful about the temptation here as these are countertrend moves and nothing has established that this is a true bottom yet in any market.
Why am I giving such generalized advice for a Monday? I won’t be trading Monday, Tuesday or Wednesday, because I’m getting married (2nd time, had to take a stop loss on the first)!
This is my soon-to-be-wife that I’ll be marrying on Monday. We will have been together for 3 years on Monday Feb 1. They say that behind every great man is a great woman, rolling her eyes. In my case, her name is Andrea and she is the reason B12Trader became a reality. It was her persistence in convincing me I could teach others to trade. The original name was supposed to be called “Bakers Dozen” but she said it was a “dumb” name and I should change it, so I came up with B12Trader instead.
As a result, I’ve promised during our wedding and 3 days away I wouldn’t trade or do any business. Working at Google full time, trading, and developing B12Trader is a hectic daily routine and it’s time I paid time to the woman who helped me make all this happen.
We have a honeymoon in March 3-10 and I will be taking a week off the newsletter and trading for that as well, but I hope to leave everyone with some guidance for the week ahead.
My best advice is to wait these countertrend moves until we have confirmation it’s a bottom, follow the downtrend if markets turn lower, and if you play these countertrend moves up, don’t hold on for more than a day or two, take those profits off the table as these markets are still very volatile!
I’ll be back on Wednesday with trades and setups for Thursday next week!
With the loss of January, this is a good time to take a breather and come back with fresh eyes and perspective after a much needed break. I look forward to talking to all of you again soon!
And here is your direction for the markets next week!
This has been a very tricky start of the year. Strong moves down, with sharp reversals testing the patience of most traders. I was correct about bearish forecasts, but I tried to pick bottoms a few days before they finally developed and I took some hits in my trades to start off January.
These markets will continue to be tricky as we are now finally seeing what appears to be a healthy correction to the 3 weeks of bearishness that brought many markets to new lows.
Be very careful, as the level of corrections so far are reasonable and healthy. They could easily reverse and there is still more movement to go for many of these markets to lock in an official bottom. There is nothing wrong with going with the trend once it’s confirmed, but if you try to bottom pick, you can get hurt quick. I’m a victim of my own impatience, but there are 11 more trading months to go, so a cold slap in the face is all one needs sometimes to see the new reality of 2016. It’s going to be messy!
BRZU (Brazil) – Bullish countertrend
After bouncing off a new low of $6.50. This downtrend was perpetuated after a strong break below the $11.50 support level in the beginning of January. The downtrend has been rather long and over-extended so a correction was inevitable and now we are on a solid 4 day bull run. To call this a bottom is premature, but the fact we’ve broken out of it’s downward trend lines and the 20-day EMA in purple is a good start. I wouldn’t say with confidence the bearish move is officially over until it reclaims the $11.50 support level.
DRN (Real Estate) – Bearish
Prices still remain in a downward channel after breaking it’s longer term uptrend. Prices are still under the major oven averages after testing them, and another test looks like it’s under way. The more this fails, the stronger the downward outlook becomes.
EDC (Emerging Markets) – Bullish Countertrend
The intermedia and long term trend are still down, but it’s just broken out of it’s 3 month downtrend channel and closed above the 20-day EMA. This is more of a healthy correction than a full blown reversal until proven otherwise. $10.50 is where the last correction occurred so I’ll be watching for this move.
EWJ (Japan) – Bullish Countertrend
With the recent negative news announcement of the Bank of Japan announcing a negative interest rate the optimists have come and driving up the price suddenly, but is it sustainable? It’s broken out of it’s strong downtrend that developed from a triangle consolidation in early January, but I’ll be looking for a break above $12.00 for more of a longer term confirmation.
GASL (Natural Gas Companies) – Bullish countertrend
GASL has had a very strong rally percentage-wise, but when you look at the bigger picture this could still be a bearish countertrend rally as we’ve simply climbed back up into the longer downward trend channel. Price hasn’t broken above the 20-day EMA in purple so it’s difficult to forecast this going much further considering how much it still has to overcome. However, $5.00 will be a key level to test for confirmation of a long-term reversal.
JNUG (Junior Gold Miners) – Bullish Countertrend
Price dropped through the $28.00 support level that held for almost 3 months and has already climbed back above $28. More price action is needed at this point to see if $28.00 will hold or if we will break out of this downward consolidation that has held prices rather low for the last 3 months.
PIN (India) – Bullish countertrend
India is still in a clear downward channel and price simply bounced off it’s lower trend line. The fact that price has broken back above $18.20 is a positive sign since it was a previous support level. The gap above support is also a strong signal that this move could have some legs. There is still more movement that needs to take place to make this more of a longer term reversal though.
RUSL (Russia) – Bullish countertrend
This one is going to be an eventful ride. Any rumors in oil will send RUSL running in the same direction as oil. This recent move is a beautiful correction to the recent downtrend movement, but while it is bullish now, the longer term trend is still down. My stance will change longer term once it can break and hold above the previous $11.00 support level.
SOXL (US Semi Conductors) – Bullish countertrend
$18.00 was a key support level and once it was broken the buyers came in strong, we’re not seeing a massive bounce, but Friday ended with a substantial move higher. Price barely closed above the 20-day EMA, but this could be the start of a new uptrend. A couple more days higher and I think this market will have the most bullish potential.
SPXL (S&P 500) – Bullish Countertrend
The intermediate downtrend is clearly over. Price has closed above the 20-day EMA, but it’s still speculation if this has the momentum to go higher. A price correction to this recent move was expected and now we have it, but this could just as easily turn back down with the movement we’ve seen already so far.
TMF (20+ Year Treasury Bonds) – Bullish
Of all the markets I track this is the one clearly in a bullish uptrend that is still holding. Of interesting notice is how it was the bullish market while the others were falling, but on Friday when all the other markets continued to rise, so did TMF. This is a very strong sign that this is the most bullish of markets to watch.
UGAZ (Natural Gas) – Slightly bullish
Natural Gas is bouncing around without a true direction. There is a slight uptrend, but the last move was very rapid and fell quickly. However, we are seeing higher lows, so that means the short term trend is up. It’s just hard to trust how long this will the very long path it took to get this low.
UGLD (Gold) – Short term Bullish
It’s not a pretty uptrend, but it’s an uptrend none the less. We’ve finally pushed off the longer term lower downtrend that has encapsulated gold’s long term movements lower, but it’s made a number of small accomplishments, bouncing off it’s long term trend line, breaking all 3 major moving averages (20-50-100) and it’s putting in higher highs and higher lows. Looking historically, these moves have been messy and reversed quickly, so I’d be careful holding on this long unless you are ready for a ride.
UWTI (Crude Oil) – Bearish
Speculative news slowed down the panic price drops in oil, but they have only brought prices right back into the already existing downward trend channel that has held for four months straight. It still has a few milestones to overcome before one can confidently call a reversal, but it’s going to get more volatile in the upcoming weeks especially with the rumors of a possible OPEC agreement to reduce production output. There are opinions on both sides of the fence, but no one will want to miss out so every rumor good or bad will have significant price movement.
VGK (Europe) – Bullish Countertrend
The fast movement downward simply wasn’t sustainable and now it appears we’re in a bullish countertrend move with prices closing just above the 20-day EMA. This is becoming a prevalent pattern amongst many markets so one has to be very careful of a fast reversal. The longer term trend still remains down, but speculation will make this a volatile recovery if any.
XIV (Inverse VIX) – Bearish
Prices still remain below all 3 major moving averages and the downward trend channel is still holding all price movement as it goes lower. This last bounce off of $16.00 is already fizzling so I would look opportunities to get in cheaper to short XIV (Inverse VIX) or play VXX (VIX) as it approaches it’s upper downward trend line.
YINN (China) – Bearish
Prices still remain below all amor moving averages and recent movement still isn’t back into it’s longer term downward trend channel. This recent price movement seems to be a small countertrend correction to an already well established down market in China.
No new purchases for tomorrow as I don’t want to hold anything over the weekend at this point.
First signs of bullish strength in the markets all week with almost 2 days in a row now of bullish movement. This could certainly be the correction as we’re seeing some large percentage retracements.
UGLD (Gold) Stopped out @ $8.55 for a breakeven profit
Even for the commodities it appears I should simply take my profits at end of day instead of overnight. I was able to get out without taking a loss, but I would have been happy with yesterdays 2.81% Profit at close.
What I’m Watching
UWTI (Crude Oil) has made a massive reversal and is now testing the upper longer downward trend line. We could be getting into new bull territory. PPO is up, but we have yet to break the upper trend line and even the 20-day moving average so I’m not going to get too excited yet. Breaking above the short term $2.45 is a good psychological barrier so let’s see if it’s a fake out for further downside movement or if we have a bottom in place.
DRN (Real Estate) is fitting nicely into a downward trend especially after the recent pullback. It’s bounced lower off the 20-day EMA in purple, and PPO is negative for the last 2 days. I was faked out with a PPO which turned positive a few days ago and now a clear down trend is forming. I don’t really want to get into a position on Friday to hold this over so I’m going to wait on this one as well.