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Chart of Day: The Worst Thing Any Trader can Do

May 24, 2017

Always be mindful of over-extensions.

After rocketing higher with gold, shares of Randgold Resources (GOLD) for example became aggressively overbought on our momentum metrics – RSI, MACD, W%R.

While many agued that it could keep running with the price of gold, once it hit triple-top resistance with over-extensions on those momentum metrics one of the worst things you can do is ignore in with hopes of higher highs. That’s because as we’ve learned, once those metrics tell us a stock is overbought, eight times out of 10 it will come down. Shares of GOLD are proving that to be true.

It’s now possible that shares of GOLD could now retest double bottom support around $85 a share, where we would look to close a short and go long. One way to consider trading GOLD now is by buying to open the GOLD July 2017 92.50 put at market prices.

Chart of Day: One of the Most Oversold Opportunities

May 22, 2017

Shares of Chicago Bridge & Iron (CBI) have become brutally oversold.

So much so, I’d be shocked if it didn't rebound significantly.

That’s because the worst – in our opinion – has already been priced in.

Nowadays, the stock has become so incredibly oversold I’d be shocked if it didn’t move higher. In fact, MACD hasn’t been this oversold sine early 2015. RSI and Money Flow are deep in oversold territory, as well. We believe that downside is limited and has already priced in bad earnings. Better yet, CBI recently named a new CEO to the board, as well, which could drive the stock higher.

Or, at least… that’s what should happen.

Without risking the house with a -35% stop loss in place, there are two ways we can trade this oversold opportunity. We’re recommending that you buy to open the CBI June 20 call at market, and or the July 2017 20 call at market.

Chart of Day: All Eyes on the 50-Day

May 17, 2017

It was only a matter of time.

The Dow Jones Industrials plunged 300 points in a day. People panicked. Investors leapt from trades. Stop losses were taken out. Fear gripped the markets, sending the Dow well under its 50-day moving average support line.

All on rumors that President Donald Trump could be impeached at the time.

Now, all depends on if the Dow can hold that 50-day moving average. Should it break that line, the Dow could sink to double bottom support at 20,400 – or 300 points lower. One way to trade such an opportunity would be to buy to open the DIA July 2017 206 put at market prices. Be safe out there. And be sure to use stops.

Chart of Day: The Best Trading Advice I Ever Received

May 14, 2017

“You give the worst advice,” I was told.

“You want me to believe NVDA is a buy just because your technical indicators tell you to buy. It’s garbage. I’m not buying this. I’ll wait for your next trade.  Why do I listen to you?"

At the time, NVDA traded at $97.50 after taking a hit.

It was oversold, though. Relative Strength (RSI), MACD and Money Flow (MFI) were all beginning to reverse higher. The story was still red hot. And the stock was sitting at triple bottom support going back to late February 2017.

And I was supposed to ignore it? Come on.

When it comes to trading, go with what you know. Don’t trade on emotion. Don’t let some one else convince you that you’re wrong. If you’re strategy says buy, buy. Never let a critic talk you out of a trade that you beleive could bounce.  Will you be right 100% of the time?  Of course not... But if you have a system that's worked for you, stick with it.

I stuck by mine and watched NVDA pop $30.  Come to think of it, I still haven't heard from my critic since.

Chart of Day: The US Dollar Wedge Intact

May 10, 2017

On April 15, 2017, we noted we were looking for a potential bounce in the US Dollar as long as it maintained the falling wedge pattern. And that’s exactly what happened. Just days after testing 98, the currency is bouncing well off the lower line of support in the pattern. Now, should the pattern continue to hold, the dollar could easily retest 100.46 before moving lower. Draw your trend lines and you can watch it daily.  One reason to watch the direction of the dollar is to gain a general sense of direction in gold and silver prices, too. It’s just something to keep in mind.

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