HUI - Goldstock Technicals........................
Expanding on my earlier post about the pre-requisite of being able to turn on a dime...
Being ready, willing and able to "turn on a dime" isn't to be confused with frenetic tape chasing (in both directions) as we've seen many traders doing over the last 5-6 weeks in which the HUI Index Goldstocks have only offered traders a total trading range of just 11 Index points...which is 5% return.
Certainly, the last 6 weeks in the Gold Sector have NOT offered us a degree of volatility, or profitability that is tradeable on any reasonable risk:reward to return basis.
The volatility, as I mentioned in the previous post...all occured in the final washout of 50 HUI points in just 20-some odd trading days...within those 2 very small windows of opportunity in April & May to re-enter between 165-175 and then atop the 40 Point "V-Bottom" U-Turn that the HUI made off of the bottom in it's initial rally move thru HUI 200 - also made in just 20 days as well.
That is a Textbook example of the prerequisite of being able to make U-Turns in this sector to both maximize profits and to minimize losses.
But, accepting that volatility is inherent and being ready, willing and able to make a U-Turn and turn on a dime at any given moment....must also be balanced by some reasonable degree of "patience" in allowing moves to develop.
Successful Traders must always have a view, or a strategy on how a particular interim move within a given sector is going to develop...but ALL Trading Strategies must ALWAYS be "dynamic" and NEVER "static."
The Market determines what we do... we don't determine what the Market does.
... I think most Traders realize this and questioning it really has nothing to do with intelligently, or productively discussing trading strategies as much as it does has to do with the continual pettiness inherrent on Stock boards.
That aside...and back to "patience" as a counter-balance to being able to turn on a dime and make frequent U-Turns.
This move in the HUI index off of the bottom resulted in a 40 Point "V-Bottom Rally" in just 20 trading days in the HUI's intial breakout thru HUI 200.
...BUT ! - the move has now disolved into a very tight trading range of just 11 Index points over the past 6 weeks.
Experience and History have taught us that this tightness will usually be resolved by a significant move in one way, or the other.
Traders now have to weigh how much Profit they are retaining here...and that of course is dependant on where they entered, if they incorporated option strategies etc.
Many of us have been waiting for either conformation from the TIC and a cooresponding reversal in the US Dollars countertrend rally, a continuation of Gold's move in Foreign Currencies, China's announcement of moving their currency away from a US Dollar Peg and most importantly - for Gold the Metal to break out of this heavy resistance in the $440's.
We got the formal announcment from China last Thursday...but, we didn't get any "pin action" in either Gold the Metal, or the Goldstocks from it.
Did I expect a more positive reaction from both Gold and Goldstocks ?
- Yes... as did everyone else.
China moving away from the US Dollar will ultimately be a watershed event for Gold.
But, unfortunately neither Gold the Metal, or the goldstocks reacted to it at all.
Traders need to digest that Market reaction on a dynamic, not a static basis.
That was a catalyst that should have generated fresh inflows of cash back into the Goldsector & Gold Funds...but, a simultaneous Rally in the Broad Market and more importantly, the breakout of the Oilstocks to New Highs...drained a lot of Cash away from what many of us expected to see in light of China's move on it's currency.
So as a Trader, do we stay statically "glued" to our earlier views on how the move would unfold, or do we react dynamically to unfolding market events ?
...obviously, that had better be viewed as a rhetorical question - or one needs to hand their portfolio over to one's broker and/or start shopping for a Mutual Fund.
If you aren't always ready, always willing and able to make U-Turns and turn on a dime at any given moment.... get out of the Game.
Another factor determining one's degree of "patience" perspective - is how much of a profit, or loss a given Trader is sitting on here.
For a trader (not a very good one), or anyone that brought a Buy & Hold mentality to this sector - that has basically just riden the 100 Point Death March from the November Highs, all the way down thru the April/May lows and now partially back up... U-Turns probably aren't even in their realm of understanding.
They wouldn't have any Trading Profits to protect here...
It's all relative.
This "trade" first gave us HUI 200 on June 16th - 6 weeks ago.
While we've traded at, or above HUI 200 for 70% of the individual trading days over this 6 week timeframe...we haven't been able to break to the upside.
While I am primarialy a fundamental oriented trader, technicals do matter and I like any other Trader have technical indicators and metric's that I monitor and use in various market environements.
If I make a well timed re-entry on a Trading Call and do so on a Portfolio Weighted basis and find myself correct on the trade and sitting on Profits from a 40 point Index move that developed as anticipated, but that then hits an incredibly tight trading band Wall, like we now see ourselves within...
I want to start watching the Technical Picture very closely and to especially look to money flows.
I also want to know from my contacts if Fund Managers are getting fresh cash coming in, or not and then to compare that information from what the tape is telling us ?
Fwiw: I'm hearing that Fund Managers have NOT received the degree of fresh inflows of Cash that we would like to have seen...and here's what the tape is telling us as well:
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Here are the HUI Index components:
NEM:
Institutional Mantra: as NEM goes - so the goldstocks go & it 'aint' going so well for NEM - lot's of red on the money flows and it's hanging by a thread on it's 50 dma here and was NEVER even close to challenging it's 200 dma.
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
GFI:
Again, lot's of red on the money flows & has broken beneath it's 50 dma here.... GFI + NEM together = 30% of the entire HUI Index and these Charts 'aint' pretty:
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
KGC:
Was smacked down HARD 2 x at the 200 dma resistance level - it's sitting right on it's "50" & if it breaks thru it's 50 dma - look out below ~
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
GSS:
A series of 4 "lower" highs is NOT good and it's not gotten anywhere near challenging it's 200 dma...and this from a perrenial Mo-Mo fav'.
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
HL:
Has really rolled over on this run - couldn't hit it's 200 dma with a Howitzer here...looking very weak.
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
These are looking a bit better than the above stocks, but at best, are only treading water alongside the HUI here:
IAG:
This is disturbing - IAG initially broke out as a leader, up nicely thru it's 200 dma early in the rally with strong money flows - now red and just fell thru it's 50 dma... not a good sign.
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
EGO:
Again a nice initial breakout - but look at the profit taking whenever it neared it's 200 dma in the $2.80's - now the 200 dma is looking like a WALL.
stockcharts.com[m,a]daclyyay[db][pb50!b200][vc60][iUc20!Lf]&pref=G
KGC:
Like EGO, nice initial move, but hit hard & is encountering heavy selling each time it nears it's 200 dma.
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
HMY:
Exploded up +50% off it's earlier lows...but that 200 dma is still a WALL - now need's to hold it's 50 dma here.
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
Here is our LEADERSHIP, as we see where the Wheat has been separated from the Chaff:
CDE:
Has been a solid performer on this rally - excellent money flow and has been challenging that 200 dma with a vengence - but, no cigar.
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
MDG:
A Leader here and still over it's 200 dma and a great company that should be part of any Core Holds:
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
GLG:
Another leader, holding above it's 200 dma & another Core Hold.
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
GOLD:
Randgold another Leader - still over it's 200 dma and ditto to the above.
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
GG:
Goldcorp has become the NEW Leader of the Mid-Tier/Major Producers in the Goldsector and is the YTD top performer - and was one of the few stocks to return to 52 Week Highs... it should remain THE Stock to own amongst the producers.
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
FCX:
Here's what having a little Dr.Copper in your Gas Tank will do for you...and without the benefit from FCX's copper component and its 9.85% weighting within the HUI index... we'd be doing a lot worse than we are technially in the HUI... this fact shouldn't be minimized by traders.
stockcharts.com[m,a]daclyyay[db][pb50!b200!f][vc60][iut!Uc20!Lf]&pref=G
The problem we're consistantly seeing is that in all but a small handfull of stocks; the 200 dma is a proverbial WALL and now many stocks have broken beneath their 50 dma's here, or are right on the line and money flows have turned negative in all but a handfull of stocks.
Big Cash Inflows into the Gold Funds off of the China Re-Peg News would have been a Tide that lifted all HUI Boats... but, as we have clearly seen... there has been no significant Inflows of Fresh Cash, Money Flows are already breaking down, profits are being taken into strength on 2/3rds of these stocks each & every time they near their 200 dma, or show strength.
In my world... anytime I'm sitting on significant profits from a portfolio weighted trade - that TA picture says - PROTECT YOUR PROFITS and ring the damn register !
Imho, it's pretty clear that Gold the Metal is going to have to push, pull, or drag the HUI Goldstocks higher.
We exercised 6 weeks of patience with the HUI from it's intial penetration of HUI 200...and with that TA Picture and with no "Pin Action" off of the China Re-Peg and with no significant degree of fresh cash coming into the Gold Funds...it's a no-brainer to put the money in the bank.
Make TA work for you... not against you.
We can always re-enter on an established 3-day print when and if the HUI takes out it's high from this move and it's 200 dma at 207+.
Reward must always be measured against Risk.
The HUI is sitting perilously atop a 40 point move here.
In my thinking, Institutional Managers given the recent 100 Point Death March they've just emerged from.... are NOT going to take the HUI back to, let alone thru it's former highs in the 240's-250's without GOLD the Metal endorsing that move via breaking to new highs itself.
The $64 trading question is then how much higher the Institutions will take the HUI stocks here, even if Gold moves higher, but not to New Highs.
Imho,,, the HUI 225 Range seems to be a reasonable risk discount.
That gives us 20-25 points on the upside... verus the Call that many of the Top Gold Pundits have been making for lows in the HUI to eventually take us to HUI 120, or 150.
If they are ultimately right (even though they just missed a 40 Point Trade (vbg) - that's 50 to 80 points of Risk to the downside.
More conservatively, if wouldn't be unexpected for the HUI to re-test the entire move from the HUI 165 bottom - and that would mean 40 points of potential downside risk.
Or, even a partial 50% retracement of the move here (as I thought we would already have seen) - would mean 20 points of downside risk here.
A reasonable trader thus may anticipate anywhere from 20 to 80 points of potential downside risk... to only possibly another 20-25 point reward to the upside - without GOLD making New Highs.
...in my thinking; sitting on 40 points with downside risk being equal to upside reward on the most positive interpretation of this environment, or as much as 80 points of risk on the most negative interpretations...does NOT present a favorable Risk:Reward Metric for just "sitting" on those types of profits.
That's why I just put them in the bank.
6 Weeks was enough "patience" and opportunity for the HUI to continue this move.
It's as close to a text-book no-brainer here to cash in those chips and MAKE the HUI confirm the continuation of this move with a sustained print over that 200 dma Wall here at HUI 207 +.
We've bounced around HUi 200-205 on the upper end of this trading band for 6 weeks now.
Giving up the next 5-10 points to allow a Technical Conformation of this move is chump change - compared to the downside risk of not doing so.
We also may just get the opportunity to even buy the HUI back much cheaper and do this all over again...
It's now "show me" time for both the HUI and the Metal.
...patience comes a lot easier with 40 points in the bank.
Slider`
PS: PDG getting taken out & shot this morning...Institutional Managers are not showing a lot of "patience", or forgiveness here...heads up people. |
