This edition is going to mostly focus on some calls I recently made based on technical indicators and I wanted to go over a few things as to WHY I did what I did. I also wanted to disclose upside targets and risk – but also discuss how others feel about this entry point as well.
First – I wanted to recap some videos I made and recent blog post about it to catch you up.
1.Video post – Call options for the noob (shows newer investors what call options are and how to use them)
2. Video post – Call options for the noob part 2 – Indicators to buy and sell (shows where I’m looking at buying and selling using technical indicators)
3. Blog post – Trading mining stock call options for newbies – follow along this trade (details the macro setup, the technicals, and what positions I took)
I have a tremendous risk at putting this information out there, but the point of all of this is to potentially capitalize on a massive leg up coming on a strong bounce potential. I detailed all of my trades, but I’m going to add again – this time I’m detailing out the items a bit more and added all of the dates for my SILJ options purchases. The FIRST thing that jumps out at you is I’m $10,400 down. Approximately $6,500 of this unrealized loss is from the SILJ options I bought at times when things were hot, and I shouldn’t have bought then. It’s a common mistake many people make when buying options, and I ended up buying more and more on the way down to dollar cost average.
The MASSIVE takeaway here is there is significant risk in this play, where ALL of this money could go to money heaven. Typically with options, I may have a stop loss at 50%. What you will see below is 4 of them right now are over 50% loss, but these were bought well below the bottom. As I expect to see price recover this week, most of this stuff I expect to turn green rather quickly.
What you will see here is a good portion of what I bought, related to GDX, is at the bottom of this sharp pullback. See the X’s below as to where I bought as RSI was in the gutter.
What my idea here is, is that due to such a sharp pull back, there would be a sharp reversal up – and with this, the MACD would confirm this move up, which then steam rolls into a large momentum play.
Since I made these moves last week, there are three entities I’ve listened to which discuss this pullback.
The Silver Chartist newsletter I get, I was finally able to listen to their weekly report early this AM, and they noticed the same thing I did with how low in value these are, relatively speaking. The TECHNICAL guys tend to wait for moves back up and confirmation – which is probably what you or other sane people do. I jumped in on a lot of this because I felt this was pure manipulation on some no-news event. Then, when you see all of this, you see the DXY wayyyy overbought.
On my DXY chart I watch, I saw the RSI way overbought and the peak above the trendline which I feel is a false breakout and will be corrected.
When you draw out further to the weekly chart, I noticed a triangle I haven’t heard anyone speak to yet that may resolve down.
Why would it resolve down? What about a catalyst? Infrastructure for $6 trillion Alex? The thinking here is that The DXY is heading south, which is why they smashed gold and silver on a spike up in the DXY – any opportunity they can to try and devalue metals against the dollar, they do. The problem is, I believe this fall is coming fast and hard.
Enter Gary Savage interview on Palisades I heard this morning…
Gary talks about a melt up of the stock market over the next few months, which he feels pushes the dollar down. He ALSO talks about that sweet spot below 88.5 or so – just as the Silver Chartist mentioned it below 88.25. In this scenario, he talks about the Dow (I thought it was the Dow) gaining perhaps another 7,000 points from where it is now.
As a CAVEAT to my entry point – Gary talks that maybe gold has a bounce, but retreats further down. On this bounce is where I plan on hitting my initial targets for my options I discuss in my post – you get a quick 2x, sell half to get your money back. He says this may drop for 4-6 weeks and then recover. But if Gold retreats down into the $1675 again, that is going to HURT my Sept call options. The thinking here is that when the DXY drops, there’s a significant risk on play which has people pulling money from paper gold to put into the stock market – in which calls gold would fall in tandem with the DXY.
Enter David Hunter….
In his interview I saw this weekend with Wealthion, it’s pretty much a lot of the same I’ve heard in other interviews, but he has a higher upside targets for his calls with this melt up before the sideways movement and bust. Where he differs from Savage is that he seems to have gold and silver melting up with the stock markets.
I think Savage and Hunter generally seem to agree on endpoints, but Savage has a bounce in gold followed by a further pullback. In his interview, Savage did seem more optimistic with silver, and with a “risk on” play, it’s possible with an infrastructure and green deal thing that silver launched into orbit with stocks, significantly outperforming gold in the short term. If gold hits $1670 again and silver hits $35, that’s a GSR move down to 47.7.
Enter John Howell….
I watch him a lot for technical trading and a video he released last night also seems to bolster my case for a strong rebound to potentially occur. In HIS world, you look for confirmation first and then ride a trade and get out. What I did I’m not advising people to do – I bought at what I thought was the bottom – and the idea behind it was that there was a strong probability of a move much higher, very quickly. Savage, Silver Chartist, Howell, and Hunter may all seem to agree (although I have not seen Hunter’s comments regarding this pull back, I can assume he’s bullish overall). What he added to his indicators that I missed was the stochastic – which I’m not very familiar with – essentially stating he’s seeing the same thing I am with the indicators and potential moves ahead.
No one knows how this will turn out. Many feel there is a strong bounce ahead, and Savage sees a down move with gold after that. This is why when you play 3 month options, if you get a 2x quick, try and bank some profits by selling half. You will also note that with a lot of my SILJ options, they are January – so I might not rush to sell any of them. With the 3 month options I might try and lock in a 2x with the GDX but might let the WPM cook for a 3x before selling 1/3 given that all 4 of those analysts see bullish silver ahead.
I hope this analysis helps some of you understand how the leverage works with options. AFTER a possible bounce up later this week or next, we’ll check back with my score card.