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Are Crude Oil & Natural Gas about to Explode?

March 13 2010
Last weeks price action unfolded just as we expected. Money poured into stocks with the focus being on small cap, banks and technology stocks. The fact that these sectors are showing strength while utilities, health care and consumer staples lag is a good sign that investors are once again taking risks in the market.

Because investors and traders are bullish on the stock market again the money flow into the safe havens like precious metals and energy has decreased. I believe this is the reason stocks moved up last week while precious metals drifted lower.

Below are weekly charts (Natural Gas, Crude Oil and the Dollar) showing what I think is most likely to happen in the next few weeks and what should fuel the fire.

Natural Gas – Weekly Chart
Natural has been out of favor for the past 3 months with most of the selling happening recently as seen on the chart. In my opinion natural gas is over sold and about ready for a bounce.

The price of NG is now trading at a key support level but until the selling momentum stops and reverses back up I would steer clear of this commodity play. Natural gas is known for taking peoples money time and time again so trade this commodity very carefully.

Crude Oil – Weekly Chart
Crude oil has been trading in a channel for several months and is now testing the upper level. If we see the US Dollar drop in the coming weeks then I expect oil to surge higher along with natural gas. If oil breaks out then I expect to see the $90 level reached within a month.

US Dollar Index – Daily Chart
The US Dollar has put in a very nice bounce/rally since the low in November 2009. Last month the dollar finally reached a key resistance level of 81. I have been talking about this major resistance level since January as the Dollar would find it difficult to break above this level.

There is a strong chance we could see 78 reached which is the measured move down. If we get follow through selling next week then I would expect 78 to be reached within 1-2 weeks and over the next few months we could very well test the 2008 low of 72.50.

Natural Gas – It’s the Season
Natural gas’ seasonal price action shows that the price tends to strengthen between February and April. So with NG at support and we are in March you can guess what I’m thinking… higher prices are where the odds are pointing.

Crude Oil – It’s the Season
It’s the same story as natural gas above….
Higher prices seem to be where the best odds are.


Energy Trading Conclusion:

As a technical analyst the above charts are pointing to higher prices in the coming weeks for natural gas and crude oil, which is exciting for us all. BUT when things are this perfect looking we must be very cautious as the market has way to suck traders into these “perfect setups” and spit us out a couple days later for a nasty loss.

Understanding how the market moves is crucial for avoiding and/or minimizing losses when trades go against us. That is why I continue to wait for my signature low risk setup before putting any money to work.

My focus is to take the least amount of trades possible each year, only focusing on the best of the best setups. My low risk setups require risk downside risk to be under 3% for the investment of choice. and the broad market needs to be showing signs of strength as well. I use several different types of analysis to confirm if a setup has a high probability of winning and those which do are the trades I take along with my subscribers.

It is very important to wait for the market to confirm a move higher before taking a position when there is this type of setup. The market could go either way quickly and jumping the gun is not a safe bet.

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Chris Vermeulen
www.GoldAndOilGuy.com

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What’s Next for Stocks, Gold, Silver, Oil & Nat Gas?

December 13, 2009
The past three weeks have been interesting to watch as the Dow (DIA ETF) has broadened causing traders to be shaken in and out of positions. Commodities have been under pressure as the US dollar has risen. Below are some charts of these investments and what I think could happen in the next couple weeks.

DIA – Exchange Traded Fund
As you can see the broadening formation is bearish as it results in a short term pullback. This type of price action is what frustrates breakout and novice traders. As traders jump into positions once the previous high is broken, they hope for a rally. Instead the market briefly moves higher then reverses and moves down to penetrate the previous pivot low. This is where breakout traders place their stops and as the market knows this, it obliges by moving below this level to shake out these traders before it rallies again.

That being said, it looks like stocks could make a new high this week, just enough to suck in more short term breakout traders before rolling over once again to test a deeper support level. A pullback to the $99-100 level would make for a great buy point.

DIA ETF Trade

DIA ETF Trade

GLD – Gold Exchange Traded Fund
The strengthening dollar is putting pressure on precious metals with gold testing the first support level. Depending on what the dollar does in the coming days we could see gold test the second support level.

In my opinion gold can test the second support level without triggering any major sell signals for traders and investors. The trend will still be up and it is important to know the horizontal support level is more important than a trend line support level.

GLD Gold Trend

GLD Gold Trend

SLV – Exchange Traded Fund
Silver is in the same boat at gold. Only time will tell if we get a bounce or a further test lower. Either way, the underlying trend is still up and we will be able trade it.

SLV Silver Trading

SLV Silver Trading

USO – Oil Exchange Traded Fund
Oil broke down out of its bull flag last week and is currently testing both trend line support and horizontal support levels. We could see a short term bounce here to the $37, 38 or 40 levels. Taking money off the table at each resistance level and raising your stop is an important money management strategy I use for this type of play.

This is a high risk type of play which I am not taking part in. But I do find it fun to track plays like this for educational reasons.

How to trade Oil

How to trade Oil

UNG – Natural Gas Exchange Traded Fund
The natural gas fund is a touchy topic with so many traders. I get emails every day asking why I trade UNG because of the contango and the fact that so many people have lost money with it; they don’t want to touch it again. My answer is very simple, it works perfectly fine for short term trading which lasts 1-20 days. “If it works, Don’t Fix It”.
I do agree UNG is tougher than other ETFs to trade, but it still makes money and that is what our goal is.

Anyways natural gas has found some support and is bouncing around. We could see it trend sideways or up until a test of our blue resistance trend line is reached. From there we can asses the situation for a possible trade.

The underlying trend is down on the monthly and weekly charts so do not get too excited about going long anytime soon.

UNg Natural Gas Trade

UNg Natural Gas Trade

ETF Trading Conclusion:
Overall the market feels a little top heavy and the price action on the charts are saying the same thing. My short term indicators are telling me the Dow (DIA fund) is over bought and ready for a couple days of selling. With any luck we will see a test of support which will flush out most short term traders this week, then a nice low volume rally going into Christmas. On the other hand, the market has been holding up well and prices could continue to drift higher from here. If that is the case we simply continue to hold our current long positions and enjoy the ride.

Silver and gold are testing support levels and if the market continues to rally here, I figure precious metals will follow. But if we see stocks pull back and test support, then we will most likely see the metals pull back further also.

Crude oil has formed a scary looking chart as it flushes out traders on this recent drop. My general rule for spec plays is to buy when the chart looks scary, but is trading at multiple support levels. It is very difficult to buy at these levels but as my good buddy David Banister from ActiveTradingPartners.com always says, “Buy when they Cry, Sell when it’s Loud”. Meaning buy when everyone is panicking out of their positions, and sell when everyone is buying into the move usually seen by high volume levels and much higher prices.

Natural Gas is jumping around like crazy. We continue to wait for a tradable price pattern to form in conjunction with a support or resistance level to help put the odds more on our side.

If you would like to receive my Free ETF Trading Newsletter:

Chris Vermeulen
www.TheGoldAndOilGuy.com

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Gold Signals Gone Wild!

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Gold Newsletter Signals – This week gold signals are popping up everywhere in our collection of gold exchange traded funds. This is a quick gold sector updated on the current price action of some of the best gold exchange traded funds.

How to Find Low Risk High Return Gold Signals
First step is to have a GOAL, Then FIND what trading tools are needed to fit your trading goals.

My Trading Goals
First – My focus is to wait for high probability trades. I do not want to make any more trades than I need to. More Trades = More Risk for my hard earned money. Waiting for a high probability trade is difficult but must be done to generate consistent profits. I wait for gold to find a support or resistance level then look for gold signals in my hand picked collection of gold exchange traded funds like GLD, DGP, GDX and many more…

Secondly – I don’t like to hold stocks or funds any longer than I need to. Most of my trades are short term and only last 2-10 days. Some trades last 1-2 months if gold is making a large move but this is something that only happens every now and then.

Thirdly – My goal is to make 2-5% on each trade and I am happy. With 10-20 trades per year at 5% it’s not a bad return on investment.

Last – Once I am in a trade and it looks like our position is about to roll over, I will lock in some profits by selling some of the position to capture a higher % profit. This is crucial if you want to consistently make money trade after trade.

Find the Best Trading Tools for Reaching the Goal
Experience has proven that the following tools and rules allow me to not only find accurate gold signals but to minimize overall risk and increase the average profit per trade. This took a long time to fine tune, but it all came back to the basic indicators and technical analysis we all learn day one of trading. The only difference is that I have a Goal, Tools and Dedication to Follow Through with my trading model. I share this information and support with members in my Gold Newsletter Service.

My Trading Tools
MACD – A popular technical indicator system that combines several moving averages to better show a stock’s trend and momentum.

Price Relative – Technical indicator that compares the performance of two gold exchange traded funds to each other by dividing their price data.

Breakout Buy Signal – This is when the price of an exchange traded fund closes above our resistance trend line and the MACD cross’ to the upside confirming the trend line break. This is the first requirement for a tradable bounce.

Breakout Sell Signal – This is when the price of an exchange traded fund closes below our support trend line and the MACD cross’ to the downside confirming the trend line break. This is the first requirement for a tradable breakdown.

Upside Reversal – When the price of a fund closes higher than the previous days high.

Downside Reversal – When the price of a fund closes lower than the previous days low.
Maximum 3% Risk Trading Rule – I do not enter any trade in GLD, GDX, ASA, XGD.TO that has more than 3% risk. This actually allows me to miss several trades, which would end up losing.
This trading model is simple. Enter a position when we have a low risk setup, and exit on a trend line break. It’s best not to enter a trade if risk is more than 3%.

Gold Miners Index – Multi Year Trend Chart

Gold Stocks At Support

Gold Stocks At Support


Currently bouncing off support, which increases the probability that we could have a nice rally.

Gold Bugs Index – Monthly Gold Signal Trend Chart

Gold Newsletter Trend Look

Gold Newsletter Trend Look


The Monthly Gold Bugs chart is trying to give us a sell signal, but gold stocks are making a strong push higher.

$HUI: $GOLD Ratio Chart – Weekly Gold Signals

Gold Newsletter Weekly Trend

Gold Newsletter Weekly Trend


Looks like the price of gold stocks have corrected and ready for rally

Gold Bugs Index – Daily Gold Signals

Gold Newsletter Gold Bugs Index Chart

Gold Newsletter Gold Bugs Index Chart


The HUI is my barometer to gauge the strength of a potential gold trade.

GLD Gold Exchange Traded Fund – Gold Trading Signal

Gold Newsletter Gold GLD Chart

Gold Newsletter Gold GLD Chart


GLD is a low risk trading vehicle providing the best win/lose ratio of any other fund I have traded.

DGP Exchange Traded Fund – Gold Trading Signal

DGP Gold Newsletter Daily Chart

DGP Gold Newsletter Daily Chart


DGP is a leveraged gold ETF providing twice the price movement of GLD.

GDX Exchange Traded Fund – Gold Trading Signal

GDX Gold Newsletter Signals

GDX Gold Newsletter Signals


This gold exchange traded fund holds a basket of gold stocks.

XGD.TO Canadian Exchange Traded Fund – Gold Trading Signal

Canadian Gold ETF Newsletter

Canadian Gold ETF Newsletter


Gold exchange traded fund for Canadian traders.

Finding low risk trading signals is a simple process but entering at the right time is the key.

Conclusion:Gold’s recent price action has not been easy for most traders. Above are the basics of what I look for when looking for gold signals and trading. If you have any questions please send me an email.
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