Thursday, July 29, 2010

Swing Trade Update / Gold - $USD Technicals

POT reported strong Q2 earnings and had an upbeat conference call regarding supply/demand issues which are improving - inflection point is near, which it describes as a point where demand reemerges, supply tightens, and pricing opportunities return. Recent supply and demand developments are favorable. In Russia grain production is expected to decline by around 20%. While Canadian wheat production is forecast to be down 23%. China which places a priority on food self sufficiency is facing significant challenges as a result of adverse weather and nutrient imbalances.

As depicted on the chart above, we can now draw in a trendline because POT broke out of its base and printed a new high. Next resistance level is the 200 SMA. Today's volume spike is very bullish as well.

Day Trade - POT retraced and carved out a bullish hammer reversal stick just below the ambush zone. Normally, we prefer that price close within the ambush zone, so in this case, we have to wait for confirmation. Enter long above the base (blue line segment), partial at the weekly pivot R2. Price rallied just shy of the full fib. extension.

ABX had strong earnings and increased the dividend by 20%, so price gapped on the open. I didn't panic and cover my short because GLD was weakening in pre-market. I placed a stop at 62% fib. retracement of last leg down as depicted on chart below. When price filled the gap and reversed, I covered half my swing short.

We'll see how this plays out. Price closed just below daily 200 SMA.

USD and Gold Weakness:

The $USD is trending lower and will likely remain weak until the economic data, and more specifically, the employment data shows a meaningful improvement. However, we are extremely oversold, in a congestion zone, approaching the 200 SMA. So, expect a technical bounce back to the trendline in the near-term.

The last chart shows the $USD (red) vs. GLD (pink). During the crash the $USD was a hedge against falling stock prices. During the recovery, GLD was a hedge against the falling $USD. Earlier this year, the $USD and GLD started trading in the same direction as a hedge against a falling $Euro. This last hedge is out of favor because the $Euro is making a strong recovery.

The gold hedge vs. the $USD will likely come back into play if the slide continues. We just have to monitor the charts closely for any tells.


JFreeman said...

Hi Jamie,

I used to enjoy reading your blog, but since about 2 months ago the blog would either take forever to open or just completely stop after only downloading the text portion of it. Has anyone brought up the similar issue? I've tried viewing your blog at different locations using different computers. However, the results have been the same... :(

Jamie said...

Hi JF,

Sorry to hear that and thanks for letting me know. No one else has informed me of similar problems. Two months ago I did fiddle with the blog template which slowed the loading, but have since changed back to the original template.

Now, I've just reduced the number of posts per page in half and eliminated nonconforming fonts. That should help with a faster load. If not, you might want to try subscribing through Google Reader.

If anyone has ideas on how to resolve the problem, please leave a comment.

RivTrader said...

What I notice is that sometimes it takes a while for your blog to completely shows/appear all the contents, but then after a while it's fine. What I do is just wait a little bit, then I can read your blog completely.

JFreeman said...

I actually didn't know about Google Reader til now. I'll use it instead. Thanks!

Jamie said...

Thanks RivTrader

Jamie said...


Yeah, Google Reader is a great tool for managing subscriber blog feeds.