-- Posted Thursday, 29 March 2012 | | Disqus

A key goal of Rick’s Picks is to offer trade set-ups that risk relatively little even when we are wrong.  This is of particular importance because our subscribers tend to be overly bearish on stocks and overly bullish on gold. Prices for the latter have been slipping for a month, and although that might discourage fair-weather buyers, it has only made our gold bugs more eager to try bottom-fishing with each new selloff. And with stock averages now entering their fourth consecutive year of stupidly rising prices, Rick’s Picks subscribers have been keener than ever to short that diabolically elusive Mother of All Tops.

We tried this for the umpteenth time yesterday, buying put options just as the QQQs were topping pennies from where expected. We’ll get to that trade in a moment.  But first, let’s talk about the trade in Comex Gold, since it illustrates how one can swim against the tide, buying the dips and dives in bullion without getting hurt even when the selling turns ugly, as it all too often does. We’d put out a buy recommendation in gold futures Tuesday night that was based on some precise “Hidden Pivot” correction targets in the Comex April and June contracts.  Ordinarily, we  tell subscribers to initiate such trades using the “camouflage” entry technique they’ve learned at the monthly Hidden Pivot Webinar. [Click here for details and a $50 discount for the April class.] This time, however, the bearish targets looked so appealing that we sanctioned dispensing with “camouflage” and simply buying either the April or June gold contract with a five-tick stop-loss. This entailed, in the case of the April, placing a bid two ticks above a 1669.90 Hidden Pivot target and using a stop-loss a hair below it, at 1669.60.  In the actual event, the micro-tight stop-loss proved more than adequate when the futures bounced $7.80 from a 1670.10 low.

If you had ridden one contract the entire way, the trade would have produced a gain of $780.  In reality, based on guidance disseminated to subscribers via bulletins intraday, those who bought four contracts at the Hidden Pivot support could have taken profits enough on three of them to reduce the cost basis of the fourth to 1659.90. The March futures ultimately got pounded down to 1656.00, but we’d already moved the stop-loss to 1666.20. Granted, the theoretical profit of $630 per contract was chicken feed compared to the $5,900 we might have made had the futures gone the “right’ way and rallied to a 1710.80 target.  However, the fact that we made a theoretical profit trading from the long side on a day when gold quotes got hammered was hardly a misfortune.

GDXJ Stopped, But…

Similarly, coming in Tuesday, we held a bullish position in GDXJ, the Junior Gold Miner ETF following a trampolined bounce off a 23.90 low last week that lay three cents from our Hidden Pivot correction target. The rally to 25.88 was a doozy, and although we tried to sell some call options against our stock near that price, we narrowly missed before GDXJ began a slide all the way down to $23.76 during the last two sessions. Bad news?  Not quite. We’d expected the relapse and had told subscribers to be alert to another buying opportunity at an even lower price if the first trade got scratched. [Click here for a free trial subscription if you want to know exactly where we expect this bottom to occur.]

Also yesterday, some subscribers reported buying May 68 QQQ puts when the “Cubes” came within 14 cents of a 68.65 rally target disseminated a while back. That position is still “live,” by the way — and profitable on paper. However, if the QQQs should suddenly reverse and lunge to yet another new recovery high, we are unlikely to lose on our bearish bet simply because subscribers, by taking a partial profit already, have reduced the cost basis of the puts to 1.34 from an initial 1.56.  And although we are likely to be wrong, wrong, wrong about this top being the end of “The Mother of All Bear Rallies,” what do we care as long as we can continue to get in and out of bullish and bearish trades without getting dinged even when things go awry?

***

Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indication of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2011, Rick Ackerman. All Rights Reserved.www.rickackerman.com

-- Posted Thursday, 29 March 2012 | Digg This Article | Source: GoldSeek.com

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