-- Posted Sunday, 14 December 2003 | Digg This Article
TRADING NOTES: I’m still trying to plow through that huge pile of e-mail messages from you all, but in the meantime, today only, I’ve expanded the list of stocks tracked below to include numerous securities on your respective wish lists. In each case, I’ve tried to focus on whatever time span will be most illuminating and helpful to you. I’m aware that it can be difficult to find decent technical coverage for stocks like Pacific Rim (PMU) and Wheaton River (WHT), and it is by tracking such off-the-beaten-path, small-cap stocks that I think I can help you most in the timing of your trades and investments.
The list of stocks and indexes that I cover will continue to mutate over time, as always, but I will gravitate toward optionable stocks, since the use of call options in particular to build “edge” into our positions has been a salient feature of my strategies over the dozen or so years that I’ve published a newsletter. I’ve been around options for nearly 30 years, including 12 years as a floor trader on the Pacific Exchange, and I’ve come up with some winning strategies for the retail customer – strategies that can help surmount odds that are heavily stacked in favor of the options professional. Mainly, they involve moderate directional plays, by way of legging into out-of-the-money calendar spreads. For instance, in late summer we bought Hecla December 7.50 calls, intending to short October and November 7.50 calls against them as the stock rose toward the strike price. As it happened, Hecla stagnated during October and November, so we were unable (effectively) to reduce the cost basis of our Decembers by way of calendar-spreading. But the stock finally took off after the November option expiration, allowing us to take partial profits on the Decembers that reduced the cost of those that remained to zero. That’s a very typical strategy for us -- one that I will continue to use so long as it works. The goal is to make at least $3 for each $1 we’ve put at risk, but in practice we’ve done far better.
***
[I’ll keep today’s comments strictly to gold. The + symbol means we have an open position, while $ means there is actionable advice.]
$ MARCH DOW MINI (10010): My minimum upside projection is 10087 -- a hidden pivot worth shorting, provided you can live with a 10091 initial stop-loss. Please note that a close above 10087, or an intraday print above 10096, will imply the futures are capable of further upside, to at least 10264.
$ MARCH S&P MINI (1071.00): There’s a fairly important hidden-pivot resistance at 1081.75, so I’ll suggest offering a single contract short at 1081.50, stop 1083.25, good in the first 90 minutes only, You’ll be on your own thereafter, but consider taking partial profits if there’s a pullback to 1073.50 after you enter the trade.
$ FEB GOLD (405.10): There was no pullback on Friday, so our bid below the market went unfilled. Today, immediate upside potential would appear to be limited by a hidden-pivot resistance at 411.20, so we’ll watch from the sidelines. Please note, however, that any progress whatsoever above 411.20 would give the futures additional running room to at least 415.80, also a hidden pivot.
MARCH NQ Mini (1422.00): The closest hidden pivot resistance lies at 1425.50, but if it’s exceeded by more than 0.75 points we should infer the futures are on their way up to at least 1444.50. At your complete discretion, you can try shorting either number, using a stop no wider than 1.75 points. You’ll be on your own thereafter.
***
$ + GG (16.80): We hold 400 recently acquired shares for 15.63. To try and reduce our cost basis, let’s offer four Jan 20 calls short against the stock for 0.40 apiece. Make the order g-t-c.
$ + HL (7.47): We hold sixteen June 7.50 calls for 1.50. Let’s try to lock in a big winner by offering sixteen June 10.50 calls short for 1.60, g-t-c.
$ RANGY (15.75): We missed buying RANGY on the last dip, but we won’t pay up. Today, bid 15.24 for 200 shares. That’s a penny above a hidden pivot support.
$ RGLD (20.81): I no longer expect the stock to pull back as far as 18.06, so let’s raise our bid: 20.28 for 200 shares. Make it a day order.
PMU (1.56): No change. We missed buying the little sonofabitch last week by a penny, but we won’t chase it. The current rally looks like it will carry to at least 1.70, but if we do any buying it will be on a pullback.
DROOY (2.47): No sooner do I return DROOY to my short list than I receive the following note from a concerned subscriber: “I used to live in South Africa - the home of Durban Roodepoort Deep - and the real facts surrounding DROOY are somewhat scary. The directors have been HUGE sellers of the stock over the past year, and continue to sell huge quantities of this stock below (rand) 17.00. The reality is, this mine is not making any money,” and in fact they continue to lose money each month. Their costs are in rands, and although the dollar price of gold has gone up, the rand price of gold continues to fall (about 25% to 30% in just the last year.) Just so you are aware: Unless the rand weakens (an unlikely event ), this South African gold mine will continue to lose money, to reduce staff, and possibly even close some mines. This is the reality of it. The rand-gold price has rands lower than when gold was worth US $280 ( the rand was at R 10 to 1 US $); thus the rand has a greater importance on this stock than does the gold price.” I will attempt to ascertain the facts by contacting the company, but in their official pronouncements the officers have hardly been blithe. The company has indeed been struggling to contain costs; on the other hand, DROOY is well leveraged to profit from $400+ gold. On a purely technical basis, the stock’s long-term chart makes me somewhat cautious. In breaching a hidden-pivot support at 2.41, DROOY has signaled a fall to as low as 1.28. This is not chiseled in stone, but the stock would need to rally above a hidden-pivot resistance at 4.52 before I’d sound the all-clear. More immediately, a 3.09 would be a heartening sign.
+ WHT (2.91): We bought 200 shares for 2.81. Sit tight for now.
NEM (47.00): Newmont looks terrific. A daunting hidden pivot at 48.74 should have stopped the last rally cold, but instead Newmont blew right by it, peaking at 50.28 before embarking on the current correction. This all but guarantees that the pullback will yield another strong rally leg following a retracement to as low as 42.13, a Fib level. If the rally starts from somewhere above that number – an odds-on bet, as far as I’m concerned – it will imply upside potential to at least $54 on the next surge.
GLG (16.07): Glamis has plenty of room to move, since the closest important hidden-pivot resistance above lies at 20.02. The stock has already signaled “ignition” for a nice rally leg, but it will take a two-day close above a hidden pivot at 17.15 to create the thrust to push it to 20.02.
BGO (3.61): Bema’s fortunes are now in strong hands, to judge from the stunning power of the A-B impulse leg that quadrupled its price from last summer’s lows near $1. Ideally the next upthrust will come from a hidden-pivot support at 3.25. If the stock gets down to that number, you’ll want to back up the truck and load up.
MFN (8.05) : Minefinders’ correction from $9 into the mid-$7s was nasty, but it doesn’t qualify (at least, not yet) as a bearish “impulse leg” simply because it only breached one prior low (November 25’s 8.20). The stock would need to touch 8.81 over the next 4-7 days to get out of short-term jeopardy.
CAU (3.56): Unlike Minefinders, Canyon Resources’ last pullback took out two prior lows, so the burden of proof is on the bulls. What would it take for the stock to get back on a bullish track? Assuming its recent high at 3.70 remains intact, we should look for the stock to seek traction at 2.98, an important hidden pivot. That would be the ideal place from which we might expect a rally sufficiently powerful to change the intermediate-term trend to bullish.
KGC (8.08): Kinross’ recent downdraft created a bearish impulse leg from a high that fell somewhat shy of an important hidden-pivot target at 9.63. This is a strongly cautionary sign, although we should continue to presume in favor of the long-term bull unless the stock takes out the 7.04 low recorded in early October. More immediately, a two-day close above an important hidden-pivot resistance at 8.50 would be a heartening sign.
GSS (7.00): Goldstar Resources has taken quite a hit since topping at 8.64 in early December, but the strength of the rally following recent lows near $6 is encouraging. If Friday’s recovery high at 7.30 is not exceeded first, I’d look to do my buying at 6.19, the closest hidden pivot of significance beneath these levels.
***
Rick Ackerman’s Golden Pivots is published on weekdays, 180 times (or so) a year. It is currently available without charge at www.321gold.com, www.goldseek.com and, sometimes, at www.kitco.com and www.gold-eagle.com. Since the letter is free, you are encouraged to reproduce and redistribute it in any damned way you please. All information was gathered from sources believed to be reliable, but no guarantee as to its accuracy is made. The risk of loss in futures, stocks or options can be substantial; therefore only genuine risk funds should be used for trading. Futures, stocks and options may not be a suitable investment for all individuals, and individuals should therefore carefully consider their financial condition in deciding whether to trade. Commodity option traders should be aware that the assignment of a short position will result in a futures position. Past profits are not indicative of future profits.
-- Posted Sunday, 14 December 2003 | Digg This Article
