UNG Tests Resistance Again!

The ETF for Natural Gas (UNG) is once again testing the $12 resistance level. I actually shorted this market last week with a protective stop above $12 which didn't get hit today but I chose to take the trade off anyway. This is the 3rd or 4th time UNG is back at the $12 level and I think it may go through this time.

Russia (RSX) Makes A 4 Month High

The ETF that focuses on Russia goes under the symbol RSX and is heavily influenced by oil prices. As you can see in the above chart, this ETF has broken out to a 4 month high on Thursday. Notice the increase in volume during the rally in March and how volume decreased during the consolidation. I would like to have seen heavier volume on the breakout on Thursday but then again we were approaching a 3 day holiday weekend so volume is usually light. This might be a good ETF to keep an eye on in the weeks to come.

The Wonderful World Of ETFs

Over the last few years I've placed my focus on trading ETFs rather than stocks. I'll still look at stocks such as GOOG or AAPL but I'd much rather focus on ETFs because they represent a broad basket of stocks and they also allow us to participate in commodity trends.

In this post I'd like to show some charts of ETFs that many of you might not be aware of. So here we go!




Above is the ETF for Natural Gas. Last January I posted on this blog that I was looking for a big bull market in natural gas but many of you couldn't trade this market because you didn't have a futures account. Well as an alternative you could have bought UNG which is the ETF for Natural gas and done quite well. Keep this ETF in mind the next time you see a trade in Natural Gas.




As most of you know I've been bullish on gold these past few weeks and so far I've been very fortunate to have the trade rapidly move in my favor. If you wanted to participate in this trade you could have bought gold futures or GLD which is the ETF for gold. What many of you are no aware of is that there is an ETF that moves twice as much as GLD! That's right, more bang for your buck but where there is more reward there is also more risk so keep that in mind too. The symbol for this volatile gold ETF is DGP.



The grains have been in a very strong uptrend and in the past the only way to profit form such a move would be to speculate in the futures market. Thanks to an ETF by the symbol DBA we can now participate in such moves without having to trade futures. DBA's movements are influenced by moves in corn, wheat, soybeans and sugar. DBA's average volume is about 2 million shares a day which is pretty good.

To save space I'll just mention a few more ETFs that I watch without posting the charts.

Metals:
Gold- GLD, DGP
Silver- SLV
Copper- JJC
Platinum- PTM
Steel- SLX

Currencies:
Euro-FXE
Swiss Franc- FXF
British Pound - FXB
Japanese Yen- FXY

Energy:
Coal-Kol
Crude Oil- USO
Natural Gas- UNG
UGA- Gasoline

There are many more ETFs that allows us to participate in international markets and major indices but for now I hope this post opened your eyes to other opportunities that are out there and hopefully you will be able to take advantage of them.

EEM: 5 Wave Expanding Pattern

First of all, let me say that I am not a follower of the Elliott Wave theory but I wanted to discuss a pattern which may or may not be of interest to you.

In the above chart of EEM, you'll notice a price formation that is called the 5 wave expanding pattern or a megaphone pattern. This pattern is made up of 5 waves. Wave 3 must move above wave 1, wave 4 must move below wave 2, and wave 5 must move above wave 3 in order for this pattern to be valid.

The megaphone pattern is a bearish pattern that is supposed to help spot a reversal of trend. In the above example, EEM is in the process of forming a top if you believe the pattern.

I don't usually trade this formation, but I have seen it work well over the years and at other times fail. Sounds like most price patterns huh?

Jim from the Kingsland Report commented today on the unusually high put volume he noticed for the June 105 puts.

I'm not saying EEM is a short, I'm not saying this is the end of the world for EEM, I don't even if I am going to short this market. I just wanted to alert those of you who do look at unusual put volume and the 5 wave expanding pattern that maybe there is a trade here on the short side.

Divergence In China

Here's a trade I'll be watching for next week.

The top chart is a daily chart of FXI and below that is a chart of the Shanghai index. Notice how the two markets both trend together. Both markets had an accelerated move up from November going into January but notice what is happening now. The Shanghai index (bottom chart) continues to make higher highs while FXI makes lower highs. This is bearish for FXI in my opinion and I will be looking to short FXI next week.

On Friday FXI was down close to 2% on an increase in volume. Notice also that FXI just about filled its gap today when it rallied up to the 105 area but then turned south and closed on its lows forming an outside day bearish engulfment.

If FXI can break below its 3 week uptrend (blue trend line), I'll be looking to get short with a protective stop above tha gap (above 105).

EEM Testing Its 50 day Average

EEM is testing an important support level which also coincides with it's 50 day moving average. I'm going to use this level as a pivot point. A close below would be bearish and suggest a move down to the 107 level. On the other hand, a bullish reversal off this average would suggest a retest of at least last week's high.

EEM Possible Double Top

EEM is looking more and more like a double top. If that's the case, the downside objective would be the 96 area. I've been short EEM since the beginning of the month and plan on holding this position for awhile assuming nothing crazy happens.
Notice when EEM made that last push up to the 116 level the On Balance Volume Indicator showed bearish divergence. I think we'll see lower prices for this ETF in the coming weeks..

Oil And Oil Stocks

Above we have a chart of the OIH (Oil Drillers) and below we have USO which is the ETF for Crude Oil.

On January 16th I began buying oil stocks because I noticed these stocks stopped coming down while crude oil prices kept falling. This setup up a bullish divergence (green line). Over the next few days these oil stocks had a nice move up and I made some money. Now I'm looking to buy a dip but I might just watch them for a few more days before I buy. Notice over the past 3 days oil prices have been moving higher while the OIH is moving lower (red line). This is actually short term bearish for oil stocks so I'm not going to be buying this dip right now unless I see something change.

Will I short them? No, I'm still looking to buy these stocks because of the seasonal pattern and the cyclical low I believe we've made but I am waiting for some bullish pattern to setup before I start buying them again. The XOI and XNG appear to be a little stronger than the OIH so those are the groups I'll probably buy. I always want the probabilities on my side and right now I see one red flag.

EEM Update

Whew! I almost got stopped out of my short position in EEM. This ETF came within .50 of taking me out of this trade yesterday but then turned back down. Today EEM got hit rather hard and was down a little over 3%. Looks like a potential double top but it is way too early to tell. I'm just going to sit with this short position which I cut down a few days ago and look for lower prices with my stop still above the 116.50 high.

EEM

As most of you know I have a short position in EEM and was looking to add on this pullback near the 50% mark which I spoke about a few days ago. I had orders to short but just missed getting filled by only a few tics! How frustrating is that??? EEM had a nice sell off today and I still have my original short position so it's not that upsetting, but it would have been nice to have added up there today. Do you think somebody read this blog a few days ago and jumped ahead of my order? (wink)

EEM Update

Just a quick update on my EEM short position. I shorted some last week around the 110-111 area, watched it sell off down to 106 and is now moving back up. I'm looking to add to my short position at the 50% retracement of the engulfing bar as seen in the above chart. That level comes in around 113.30 (green horizontal line).

Silver Seasonal

One of the tools I like to use in my trading is seasonality. I think seasonality is misunderstood by many traders. The way I like to use seasonals is to COMBINE it with other tools to improve timing and accuracy.

Long before the internet became popular, I was receiving my seasonal charts in the mail from a company called Moore Research Center,Inc.
In my opinion they have the best seasonal charts and do the best research on seasonal tendencies. I highly recommend their work. The above chart is courtesy of Moore Research Center,Inc.

The above chart is the 15 year seasonal tendency for silver. As you can see in the yellow highlighted area, Silver tends to rally during the month of January going into February. This appears to be a good time to be bullish on silver and even gold

Now just because there is a seasonal tendency to rally doesn't mean you just buy and hope the seasonal strength repeats this year. I like to combine it with other tools to help improve the accuracy. If you scroll down below you will see my other reason for being bullish on silver now.

SLV (Silver) Showing Signs Of Strength

Today the strongest ETF was SLV(Silver) up almost 4%. Most of the commodity ETF's were up nicely today.

Above we have a 6 month daily chart of SLV (Silver iShares). Silver is clearly in an uptrend if you look at the large swings. SLV just recently tested the 200 day moving average and has now broken above the trendline which tells me that maybe this pullback is over. MACD is also about to give a buy singal. There is also a seasonal tendency for Silver to rally this time of year. I'm looking to get long Silver next week. I bought some feeler shares in the afternoon today.

Nasdaq New High

The major indices rallied today with the Nasdaq leading the way. QQQQ broke out to a new high with good volume. Remember QQQQ volume does not reflect the actual volume in the market.

We've seen over the last few days how the Nasdaq has been making higer lows showing relative strength compared to the dow and S&P so it's no surprise that the Nasdaq lead the really again today. I'm not sure what to think here. I'm not a buyer and I'm not a seller. I think I'm going to wait for earnings and I'll see how the market repsonds. If stocks come out with good earnings but fail to rally, then obviously that is a very bearish sign. If earnings are in line or lower and stocks rally anyway, then that would be quite bullish. These are the types of things I'm going to be looking at over the next few weeks.