Precious Metals & Oil ETF Trend Trading

Last week was exciting with broad market and gold forming an intraday reversal pattern after a long overbought rally, then broke down though short term key support levels. While this move lower was tough on the pocket book for those who chased the market up the past few days and/or were not moving their protective stops up, this move is good for the health of the market.

This pullback is actually a good thing for us active traders who wait for low risk setups and don’t chase prices higher, but rather buy on the dips in a bull market when most of the risk has been flushed out already. Trading with low risk setups is not the most exciting type of trading because there are not a ton of setups but if one can be patient and wait for these plays it is a very profitable strategy in the long run.

Those traders who live and breathe the market focusing on trading intraday price action most likely made a small fortune last week with Fridays sell off in stocks and precious metals. You can see how some of us took advantage of this sharp pullback last week with my before and after videos.

Below are the charts showing what I am currently thinking is going to happen for gold, silver, gold stocks and oil. I will be tracking the market with intraday charts to help pin point a low risk entry point for a possible short or long position as the market unfolds this week.

GLD – Gold Trading ETF

The chart below is an updated chart which I have showed several times. It shows how gold corrected, bottomed and is now trending back up. This week I will be watched closely to be sure we take a position which has the highest probability of working in our favor if and when a low risk setup occurs.



SLV – Silver Trading ETF

Silver really took a hit on Friday. It is now trading near support but there is not much we can do until we see what happens on Monday. There could be a bounce or more down side, tough to call right now…. And it’s not something you want to be on the wrong side of.



Gold Stocks – Gold Stock Trading

Gold stocks did not drop as much as I thought they would which indicates the market is still very bullish on gold. There is still potential for more downside… so I am letting the market unfold before doing anything.



USO – Oil Trading Fund

You can see oil moved down sharply on Friday and is now testing both a price support level and trendline support. Although this looks like a perfect setup, the market is designed to shake people out of positions before continuing the move. So it is likely for oil to dip which would break both these support levels triggering stop orders. Then the price should drop to the key support level where support should be found for at least a bounce or a new bottom.



Precious Metal & Oil ETF Trading Conclusion:

In short, the market had a nice correction on Friday and the heavy selling volume indicates that we are getting close to a larger correction which should provide two swing trades, a shorting opportunity and a new buying opportunity in the coming days, weeks or months depending how long the market takes with this pullback/correction.

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Trends for Stocks & Commodities: Gold, Oil and Indexes

Stocks and metals have been on a steady rise this week. The US Dollar drifting lower has helped to add fuel to the oversold bounce in equities and metals we are seeing.

Stocks – NYSE 65 Minute Chart
Stocks have started to show signs of a possible reversal to the upside. So far this week we have seen the major indices form a higher high and as of today are stuck under the key resistance level shown on the chart below. The rally seen this week has been on light volume indicating there is not much strength behind it at this time.

If buying volume picks up and we see the NYSE break this resistance level then money should start to pour back into the market as the first set up of higher highs and lows will have formed and that is the definition of an up trend.



Gold – 24 Hour Trading Chart Using 8 Hour Bars
This chart allows us to look far enough back to see key support and resistance levels. Today we saw gold sell down with rising volume which is bearish.



Oil – 10 Hour Candle Chart
The Oil fund is currently in the same situation as gold. It had a nice rally/bounce which was expected from the rather large sell off over the past couple weeks.



US Dollar Index – 2 Hour Chart
This chart shows the dollar rally that triggered the recent sell off in gold & silver from Jan 25th to Jan 31st. So far in February, the dollar has drifted lower into a support level and bounced sharply on Wednesday. This is very bullish price action and points to higher dollar prices in the near future.



Stock & Commodity Trading Conclusion:
In short, stocks and metals rallied on light volume which is a sign of weakness. They are both stuck under a key resistance level and selling volume has started to pickup. To add more logs to the fire, the US Dollar appears to be picking up speed for another surge higher in the next couple days.

All of this leads me to believe this weeks rally is just a dead cat bounce and lower prices are just around the corner. But, because the 60 minute intraday charts have made a higher high, the down trend is now in question. When in doubt, just stay out. During possible tops or bottoms I find it best to stay clear of the market, even for day traders unless there are very strong price and volume surges occurring.

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ETF Update - Gold, Silver and Oil Out Perform their Equities?

Since the market crash in late 2008 we have seen investors favor quality stocks that pay dividends and have steady earnings. Fast growth companies and equities with physical resources like commodities have also done well.

Let’s examine the monthly charts of gold, silver, oil and natural gas, and observe how they have traded in comparison to their mining equities

Gold – Monthly Chart
Looking at the monthly chart as far back as 2004, we see that gold has formed the same patterns repeatedly. This has created a stair step pattern and allows us to calculate measured moves and a time frame for this to take place.

As we can see gold has broken its 2008 high and is starting another rally which we have seen several times before. I figure we could see gold rally for another 3-5 months and possibly reach the $1500 -$1600 level before forming a multi month or year consolidation.

Investors around the world are buying gold because it is a physical product which has been proven to hold its value.


Silver & Precious Metal Stocks – Monthly Chart
Silver and PM stocks have been trading in tandem since 2004 and we can see this by looking at a price performance chart of both silver and the HUI index. The interesting part is that the physical commodity silver has held its value better than the stocks during corrections.
Apparently investors prefer tangible investments over stock certificates of mining companies in periods of increased volitility. Lower risk is in the commodity.


Oil – Monthly Chart
Crude oil has held its value over energy stocks for the majority of the time since 2003. And currently, investors are more comfortable holding oil as a safe investment over energy stocks.


Natural Gas – Monthly Chart
Natural gas is the energy sector’s underdog in my eyes. The world has found so much natural gas in the ground and discovered cost effective ways to collect gas that it will continue to see investors move away until inventory start to deplete.


Commodity Trading Conclusion:
Investors around the world continue to put money into gold which is a universal hedge against inflation. The broad market appears to be trading at a major resistance level. Tops in the market generally take a much longer than to reverse directions than market bottoms. We will not knot for sure if we are entering a top for a couple months as the charts unfold. Now that commodities are trading back at reasonable levels I think they will hold up better than equities if the market starts to correct.

We continue to enter low risk setups and trade with this strong up trend but are aware that we must be protected and focus on the lower risk plays.

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Energy ETF Trading Report - USO and UNG

So far this week has been generous with our commodity ETFs moving higher, other than natural gas which is clearly in a bear market. Each of the commodity ETF trading charts below is at a different stage and it will be interesting to see how things unfold in the coming weeks.

Trading ETFs is very rewarding when done properly and using multiple time frames for timing your entry and exit points is crucial. My main focus is on the weekly and daily charts but I use a 30 minute intraday chart when the time comes to actually pick an exact buy or sell point. Below I have provided both the weekly and daily chart so you can see how the same ETF looks completely different on the two time frames.

USO Fund Trading – Weekly & Daily Trading Charts
While gold and silver have been moving higher oil has been flagging sideways taking a breather. Both the weekly and the daily charts are aligned for a nice move higher if the trend and charts follow through on their patterns. We could get some tradable action in the next couple days.


UNG Fund Trading – Weekly & Daily Trading Charts
Natural gas is really starting to slide. Wednesday UNG dipped below the Sept low of $8.94 by a couple cents then moved up into the close. Overall it’s not bullish. This could be the start of a waterfall sell off which is a sharp heavy volume sell off that lasts 3-5 days.


Commodity ETF Trading Conclusion:
To sum everything up the gold and silver ETFs are on fire as they continue to surge higher. Being ready for a sharp reversal is important if you want to lock in gains on a portion of your position.

Crude oil is taking its time but looking ripe for a breakout higher. We continue to watch for some action.

Natural gas continues to get pushed down and it’s not looking good for higher prices anytime soon. We are waiting for a shorting opportunity or an oversold condition to play a 1-5 day bounce.

Quick Trading Tip: If you have a position which has done well and has moved up for an extended period of time be sure to draw some trend lines and tighten your stop, or set a stop, under a tight trend line. Sell some of your position (25-50%) to lock in gains and let the core position continue to mature. If you get a pullback to a support level (previous breakout level) you can buy back your other part of your position at a lower price.

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ETF Commodity Trading Analysis & Charts - USO & UNG

Commodities continue to perform well as the US dollar tests the October lows. If we step back and take a look at the weekly charts of the gold, silver, oil and natural gas ETFs we can get a better feel for what to expect in the coming week.

Trading commodity ETFs can be a very fun and profitable experience when done correctly. The first things I always analyze are the longer time frame charts. This allows me to see past support and resistance levels and determine whether the investment is trending up, down or sideways.

Let’s take a look at crude oil and natural gas.

USO Fund – Weekly Chart
The USO fund continues to look bullish as it consolidates the breakout with volume getting lighter. We could see a bounce this week and if we do I will be watching for a low risk entry setup.


UNG Fund – Weekly Chart
UNG continues to trend down and under perform the market. The last time UNG dropped to this level we had a nice bounce generating a 30% move in 3 weeks. But I don’t think that will happen this time. The price has been sliding lower slowly on light volume. This type of price action is not as predictable when compared to others. I will wait for a proper setup before buying an oversold bounce or shorting after a bounce.


Commodity ETF Trading Conclusion:
The weekly charts don’t lie. Trade with the underlying weekly trend and you will put the odds in your favor. I use the daily chart and 30 minute intraday charts for timing my trades as those time frames have proven to be very accurate with commodity ETF investments.

WE continue to be hold our golden rocket stocks and GLD fund. If the market co operates this week we could get some trading signals for both Canadian and US ETF funds.

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Crude Oil and Natural Gas ETF Trading

The past week in gold, silver, oil, natural gas and the broad market wasn’t anything to write home about. We are seeing controlled profit taking which is making the market choppy. Many traders are getting very bearish on the market which is a good thing in my opinion. According to my market internals, sentiment and volume analysis we should get a shake out (sharp dip) which would make traders exit their positions before the market continues higher.

Some trader’s say we are in a bull market, others say we are in a major bear market. Either way the trend is up on the daily and weekly charts and companies are making money. Buying on over sold dips has been very profitable this year. Until I see things drastically change, this is my strategy for the broad market.

Lets take a look......

Crude Oil – USO Exchange Traded Fund
Oil has been making a strong rally after breaking out of is multi month consolidation pattern. We are now looking for some type of pullback or test of breakout for another low risk entry point.


Natural Gas – UNG Exchange Traded Fund
Natural gas is having some trouble breaking out above the multi month resistance trend line. Buying here is a 50/50 bet and I will wait for another entry point before putting our money to work.


Crude Oil and Natural Gas Conclusion:
Overall, the market feels ready for quick snapback to shake traders out of profitable positions. I expect a resumption of the up trend as the market slowly creeps higher at a steady pace digesting each rally with sideways movement.

I know many people are shorting the broad market and that is not something I am willing to do yet. Until I see a drastic change, long positions are my bread and butter. Once the market does reverse, there will be plenty of time to play the short side using the Leveraged ETFs.

Commodities are taking a breather but with our support trend lines nearing I expect some movement this week.

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