Gold and Silver Nearing MAJOR Long Term Support

Gold and silver along with their related miners have been under a lot of selling pressure the last few months. Prices have fallen far enough to make most traders and investors start to panic and close out their long term positions which is a bullish signal in my opinion.

My trading tactic for both swing trading and day trading thrive on entering and exiting positions when panic trading hits an investment. General rule of thumb is to buy when others are extremely fearful and cannot hold on to a losing position any longer. When they are selling I am usually slowly accumulating a long position.

Looking at the charts below of gold and silver you can see the strong selling over the past two weeks. When you get drops this sharp investors tend to focus on their account statements watching the value drop at an accelerated rate to the point where they ignore the charts and just liquidate everything they have to preserve their capital.

Gold Bullion Weekly Chart: 

The price and outlook of gold has not really changed much in the past year. It remains in a major bull market and has been taking a breather, nothing more. Stepping back and reviewing the weekly chart it’s clear that gold is nearing long term support. With panic selling hitting the gold market and long term support only $20 - $30 dollars away this investment starts to look really tasty.

But if price breaks below the $1540 level and closed down there on a weekly basis then all bets are off as this would trigger a wave of selling that would make the recent selling look insignificant. And the uptrend in gold would now be over.

Silver Bullion Weekly Chart:

Silver price is in the same boat as its big sister (Yellow Gold). Only difference is that silver has larger price swings of 2-3x more than gold. This is what attracts more traders and investors but unfortunately the masses do not know how to manage leveraged investments like this and end up losing their shirts. A breakdown below the $26.11 price would likely trigger a sharp drop back down to the $17.50 level so be careful.

Gold Mining Stocks – Monthly Chart:

If you wanna see a scary chart then look at what could happen or is happening to gold miner stocks. This very could be happening as we speak and why I have been pounding the table for months no to get long gold, silver or miners until we see complete panic selling or a bullish basing pattern form on the charts. We have not seen either of these things take place although panic selling is slowly ramping up this week.

There will be some very frustrated gold bugs if they take another 33% hair cut in value.

Precious Metals Trend and Trading Conclusion:

In short, the precious metal sector remains in a cyclical bull market. That being said and looking at the daily charts the prices have been consolidating and are in a down trend currently. Until we see some type of bottoming pattern or price action form it is best to sit on the side lines and watch the emotional traders get caught up and do the wrong thing.

The next two weeks will be crucial for gold, silver and miner stocks. If metals cannot find support and close below the key support levels things could get really ugly fast. If you would like to receive my daily analysis and know what I am trading then check out my newsletter at The Gold& Oil Guy.com

Chris Vermeulen


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WTI holds range support....Brent bears take the advantage

With Brent breaking below it's upward trend line it's time to check in with Dominick Chirichella at the CME Group......

The spot WTI contract held range support and has now moved back to the middle of its trading range on the last day of trading for the March Nymex WTI contract. The soon to be spot April contract has been in a trading range (since the middle of January) of about $99/bbl on the upside and $95.40/bbl on the lower end. At the moment the contract is trading in the middle of its trading range. Both range support and resistance have been successfully defended several times since January. For now I would expect more of the same unless a strong directional catalyst emerges.

On the other hand the spot Brent contract has broken below its upward trending channel that was in play since mid-January. It is trading below the key technical level of $118/bbl with the possibility of the contract moving to test the next support level of about $115/bbl. It has now been trading below the $118/bbl level for five trading sessions and barring a surprise upside price direction catalyst emerging Brent should remain biased to the bearish side.

As I discussed in yesterday's newsletter the April Brent/WTI spread failed to breach the upside range resistance level and has traded down toward the $19.70/bbl support level. For those who entered the spread from the short side the market is close to the original objective and if the $19.70/bbl support level holds we could get another move back to the upside. If support is breached the next support level for the spread will be around the $18.25/bbl level.

The Seaway Pipeline operator indicated in a FERC filing that they expect to be able to average about 295,000 bpd flow through the line for the period February through May. They also went on to say that they hope to raise the throughput to 335,000 bpd but it is not expected to increase above that level due to the anticipated mix of light and heavy crude oil. This is slightly bearish for the Brent/WTI spread as it is an increase of movement of oil out of Cushing over January's levels.....Read Dominicks entire article.


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Devon Energy DVN Reports Fourth Quarter and Full Year 2012 Results

Devon Energy Corporation (NYSE:DVN) today reported a net loss of $357 million for the quarter ended December 31, 2012, or $0.89 per common share ($0.89 per diluted share). The company’s fourth quarter financial results were impacted by a non-cash asset impairment charge of $896 million. Excluding the asset impairment charge and other items securities analysts typically exclude from estimates, Devon earned $316 million or $0.78 per diluted share in the fourth quarter of 2012.

Asset impairments also led to a loss of $206 million for the year ended December 31, 2012, or $0.52 per common share ($0.52 per diluted share). Excluding adjusting items, the company earned $1.3 billion or $3.26 per diluted share in 2012.

“In spite of a challenging commodity price environment that impacted our financial results, Devon delivered solid operating results in 2012. During the year, we continued to make significant progress toward the conversion of our asset portfolio to a higher oil weighting,” commented John Richels, Devon’s president and chief executive officer. “This is evident through the strong oil production growth we delivered during the year and the impressive growth in oil reserves.”........Read the entire Devon Energy earnings report.


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National Oilwell Varco and Robbins & Myers Receive Clearance

National Oilwell Varco (NYSE: NOV) and Robbins & Myers (NYSE: RBN) jointly announced today that the Antitrust Division of the United States Department of Justice has closed its investigation of the parties’ previously announced merger.

NOV and RBN also received today a no action letter from the Canadian Competition Bureau. Having received clearance from the United States and Canada, NOV and RBN expect to complete the merger tomorrow, February 20, 2013. The transaction has been cleared without modification.


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EIA: Gulf Coast Crude Stocks Generally Fall Sharply in December Because of Inventory Taxes

Crude oil inventories in the Gulf Coast often fall sharply in December, averaging a decline of nearly 8 million barrels in that month from 1981 through 2011. Preliminary data for December 2012 show a decline of more than 12.5 million barrels in the region, bringing end of year crude inventories to approximately 165 million barrels.

The reason for this sharp decline: December 31 is the typical assessment date for taxes on crude oil stocks that are collected by many states/counties/municipalities in regions where the bulk of U.S. crude oil and petroleum product inventories are stored. To decrease crude inventories, companies can do a combination of the following: delay or decrease imports, increase runs at refineries, move crude oil out of the taxable region, or sell crude oil to other market participants.



Following December declines, inventories tend to recover in January. Although large crude oil draws can be an indication of demand outpacing supply, the December phenomenon typically does not reflect tightening of the oil market, but rather how companies in the region are taxed on crude stocks. During the middle of the year, crude inventories in the Gulf Coast region both rise and fall, averaging out to relatively small net changes in stocks for a given month.

At the end of December each year, parts of Texas and Louisiana, where significant volumes of crude oil are stored, assess ad valorem taxes (meaning, according to value) on end of year crude oil inventories. These taxes, along with the generally accepted accounting practice of last in, first out (LIFO) method used to value the assets, create an incentive to draw down crude stocks in the region at the end of the year in order to reduce the tax bill.

 

If oil prices have risen during the year, this accounting practice gives companies stronger incentive to reduce inventory because doing so will further limit their tax exposure. Conversely, if oil prices have fallen throughout the year, companies have less incentive to reduce crude held in storage.

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Crude Oil, Natural Gas and Gold Weekly Technical Outlook for Sunday February 17th

It's Sunday and that means it's time to check in with our friends at Oil N'Gold.com and get their call on crude oil, natural gas and gold......

Crude oil stayed in range below 98.24 last week. With daily MACD staying below signal line, 98.24 should be a short term top and deeper decline is in favor. Below 94.97 will confirm this case and should bring deeper pull back to 55 days EMA (now at 92.47) and below. On the upside, break of 98.24 is needed to confirm rally resumption. Otherwise, near term outlook is neutral at best.

In the bigger picture, price actions from 114.83 are viewed as a triangle consolidation pattern, no change in this view. And, such consolidation could still be in progress and Crude oil remains bounded in the converging range. Nonetheless, the pattern should be close to completion and an upside breakout should be seen soon. Above 100.42 will strongly suggest that whole rebound from 33.29 has resumed for above 114.83. And in case of another fall, strong support should be seen above 77.28 to bring rebound.

In the long term picture, crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2. The corrective structure of the rise from 33.2 indicates that it's second wave of the consolidation pattern. While it could make another high above 114.83, we'd anticipate strong resistance ahead of 147.24 to bring reversal for the third leg of the consolidation pattern.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

Natural gas finally broke through the medium term rising trend line last week and closed below. The development suggest that whole up trend from 1.1902 has completed at 3.933 after hitting long term channel resistance. Further decline is now expected as long as 3.323 minor resistance holds, to 3.05 first. Break will resume the whole decline from 3.933 and should target 100% projection of 3.933 to 3.05 from 3.645 at 2.762 next.

In the bigger picture, the bounce off from the long term falling channel resistance for 6.108 retained the case that such decline isn't finished. Break of 2.575 support should make a new low below 1.902 to extend the whole long term down trend. Nonetheless, strong rebound from 2.575, followed by break of 3.933 resistance, will revive that case of long term reversal and target a test on 4.983 key resistance.

Nymex Natural Gas Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

Gold dropped sharply last week, especially on Friday and breached 1600 level before closing at 1610.3. The development is confirmed with the view that fall from 1798.1 is still in progress. Near term outlook stays bearish as long as 1651 minor resistance holds. Current decline should target a test on 1526.7 low next.

In the bigger picture, price actions from 1923.7 high are viewed as a medium term consolidation pattern. There is no indication that such consolidation is finished, and more range trading could be seen. In any case, downside of any falling leg should be contained by 1478.3/1577.4 support zone and bring rebound. Meanwhile, break of 1792.7/1804.4 resistance zone will argue that the long term up trend is possibly resuming for a new high above 1923.7.

In the long term picture, with 1478.3 support intact, there is no change in the long term bullish outlook in gold. While some more medium term consolidation cannot be ruled out, we'd anticipate an eventual break of 2000 psychological level in the long run

Comex Gold Continuous Contract 4 Hour, daily, Weekly and Monthly Charts


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Crisis Investing 101: How to Protect Your Portfolio With Commodities

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Baker Hughes Latest U.S. and Canadian Rig Counts

BHI Rig Count: U.S. + 3 at 1762 rigs.

U.S. Rig Count is up 3 rigs from last week at 1762, with oil rigs up 7 at 1337, gas rigs down 4 at 421, and miscellaneous rigs unchanged at 4. U.S. Rig Count is down 232 rigs from last year at 1994, with oil rigs up 65, gas rigs down 295, and miscellaneous rigs down 2.

The U.S. Offshore rig count is 55, unchanged from last week and up 14 year over year.

BHI Rig Count: Canada + 20 at 651 rigs

Canadian Rig Count is up 20 rigs from last week at 651, with oil rigs up 20 at 500, gas rigs unchanged at 151. Canadian Rig Count is down 54 rigs from last year at 705, with oil rigs down 16, gas rigs down 38.

Additional information on the rig count is available at Baker Hughes.com
 

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