Professor’s Comments June 9, 2016

Posted by OMS  at June 9th, 2016

The Dow rose 67 points, closing at 18,005.  Volume was moderate, coming in at 102 percent of its 10-day average.  There were 275 new highs and only 5 new lows.

At its high, yesterday’s rally was 77 points of a potential 100-point move predicted by the small change signal in the A-D oscillator.  So it’s hard to tell if yesterday’s rally was the predicted Big Move or will another large move occur today.  We’ll see.

After yesterday’s trading, the 2-period RSI Wilder on the Dow ended in overbought territory (95.24) with a VTI reading of 69.42, which is slightly below the Trend Zone of 70.  So it’s likely that the Dow will pull back and rest for a day or so before it resumes its march toward a re-test of the 18,168 level.

All of the cockpit indicators remain positive, so if the Dow pulls back today I will look at it as a potential buying opportunity.  However, with the Dow now less than 200 points from the 20 April high, I’m not going to be aggressive with any purchases.  I’m only looking at trades now. 

Before the market opened yesterday, I received an email from a student asking about ABX, one of my Trigger Trades that was trading above its trigger point in the pre-market.  Gene S. wanted to know if I would chase the stock when the market opens or let it go?

Because I felt this was a great question on strategy, I answered Gene with the following: 

“A lot of times with mining shares, the pre-market isn’t a good tell.  So you might want to wait until you see what happens after the first 15-min print.  If the stock starts to move higher, it’s likely that it will continue higher.  Remember, gold could be starting an impulse wave 3 up.  And if this is what’s happening, gold (the metal) could easily hit 1400 on this move. 

So you might want to look at 19.23 as the trigger for better things to come.” 

Anyhow, as things turned out, ABX opened at 19.54 and made a first 15-minute bar print high of 19.92.  But after the stock made this first 15-min high, it never advanced above it.  The stock just continued to drift lower all day long, finally closing at 19.20, slightly below the trigger.

Watching the first 15-min bar high before buying is a strategy I teach in my Basic Class.  It’s something you should always consider whether trading a Trigger Stock like ABX or any stock for that matter.  When I’m looking to buy something, I never like to overpay.  Doesn’t matter if it’s a stock, a new fishing shirt, or a car.  I never like to overpay. 

But in order not to overpay, you must have patience.  This is why I use the first 15-min bar technique.  If the stock opens above its trigger point, and is really going to move higher, then it must demonstrate this by exceeding its initial 15-min bar print high.  If this happens, then the odds are high that the initial pop was not a false move. And even though I will have to pay a higher price, I feel that I’m still getting a bargain because I’m paying up for strength.

But let’s think about this for a minute. Before you consider buying any stock, you should ask yourself why you want to own it in the first place.  Is because the stock was highlighted by a Trigger Trade?  Or because it’s ranked high on the Dean’s List, along with many other gold stock, with positive PT indicators?  Hmmm?

The reason I bought a few shares of ABX near the close yesterday was because I believe gold is going a lot higher.  If I’m right about gold starting an impulse wave 3 up, it could take the metal to the 1400 level.  This is why I want to own gold.  The fact that ABX appeared as a Trigger Stock was only a small reason for me to become interested in gold.  Seeing UDN replace UUP on the Dean’s List was a much larger reason.  And now that UDN is on the Dean’s List, does it really matter if I buy ABX one tick above the trigger, or at its high for the day?  Maybe, but if the appearance of UDN and the wave 3 pattern are telling me that gold could be starting a move toward 1400, I’m not going to quibble about a point or so. 

It’s the same reason I used the Trade Triggers to buy CVX and RDC, which reached a high of 19.94 yesterday before pulling back to close at 19.40.  I didn’t buy these energy stocks because they were Trigger Trades.  I bought them because DIG replaced DUG on the Dean’s List and I wanted to own energy.  The fact that both were Trigger Stocks was not the deciding factor for me to become involved with energy.  The trigger only provided an entry point. 

With crude oil now trading above 50 per barrel, most energy stocks are going to have a field day when it comes to generating profits.  Remember, when our friend (?) the Saudi’s, tried to put U.S frackers out of business by flooding the market with crude, it forced American produces to invest in new fracking technology.  This now enables them to be profitable with $30-35 crude.  So with crude currently trading above $50, these American drillers and producers are likely to be posting a lot of green numbers come the next earnings release.

Bottom Line: As long as DIG and UDN remain on the Dean’s List, I want to own energy and gold..

BTW, if you still have not seen the webinar I did recently on the relationship between the Dollar, currencies, gold, and stocks, please take the time this morning to get a copy.  With the Brits voting on an exit from the EU in 2-weeks, you need to know how this will impact the Dollar, Bonds and equities.  It’s potentially a Big Deal. So don’t be penny wise and pound foolish (forgive the pun).  Spend the <30 bucks to get a copy of the webinar.  You’ll be glad you did.  Then, the next time you hear a TV commentator say something about why the market either rose or fell because of what happened with the Fed or what somebody overseas said or did, you’ll know the truth.  The webinar will help you understand why you want to trade oil, gold, or anything else, before you push the buy button.  All for less than 30 bucks!

That’s what I’m doing,

h

Market Signals for

06-09-2016

One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE

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