Today is another perfect example of how the 79 & 89 MA lines can be support (or resistance) you can rely on with a favorable odd. From the daily chart below, you can count the eight times price bounced off from these MA lines. While three of them dipped below the MA lines for a few days, they did bounce back eventually. What I do when price penetrated the 79 & 89 MA on the downside is to watch the price momentum for the next few days. If price momentum continues to head south as in lower high and lower low after penetration, it is bearish; but when price gyrating within the vicinity below the 79 & 89 MA lines, I’ll factor in the possibility of a 60% odd of bouncing back to the upside.
However, despite the bounce today, I’m not trusting the rally. This is a personal observation with my own bearish bias in interpretation of the data. Below are the reasons why I don’t trust today rally:
- rally failed to take out yesterday high and volume was lower than yesterday
- the high on April 27th is still a possible 3rd lower pivot high
- 5 MA line is pointing down and is about to cross down the 15 MA line
- both momentum oscillators below are heading lower.
- all my hi-beta small cap positions were down
- $KGJI huge downdraft seems to me is a harbinger of small-cap doom.
Because of the above, I decided to hold on to my $TZA even though I was a bit under water. Oh… another reason I hold on to $TZA is due to the price action on the daily and weekly charts (see below):
Notice the red bar did not complete the yesterday green bar the way the DOW up bar complete the yesterday red bar. And from the weekly $TZA chart below:
A solid green bullish engulfment weekly candlestick bar raises a possible bottoming formation here. This lead me to wait a bit longer before deciding to cut losses on my $TZA position.
The big elephant in the room today is $KGJI. I had a pre-planned number of shares I wanted to accumulate on this stock and I thought the initial downdraft offered me the great opportunity to do so. I set up buy orders in three different lower buying points and they were all filled. But then, the panic selling/snowballed-effect began to kick in. As you can see in the 5 min chart below, the relentless selling continued to kick in at 12:55pm EST (see circle in volume bars in the 5min chart below) when the first high volume bids that appeared were swallowed easily. Now, this might not be the work of the short and it could easily be another large holder who decided that the large bids at 12:55pm was enough to take his market order to either cut his losses or get out at breakeven. When I saw that the large bids were consumed quickly, I was going “Whoa! Did someone know something? Should I sell too?” I bet I wasn’t the only one thinking that and many other decided to take action by dumping as well.
In the absence of news, I speculated this was a panic selling caused by a lingering doubt in most Chinese public companies traded in the U.S. market. Because I believe $KGJI is an undervalued legit company I decided not to get sucked into the panic mode which could easily had me ended up selling at the bottom. Nevertheless, the snowball effect kicked in after 12:55pm and the volume peaked out at 02:25pm (see 2nd circle in volume bar) along with a low at 88 cents. Ironically, the number 88 is rhymed as “prosperity” in the Chinese language and is considered as positive numbers to have.
What I wished was that I did not have a position before today so I could buy the drop. I was tempted to add more below $1 but my principle of not averaging down prevented me from doing so. My trading principle allows me to averaging down as long as I’m accumulating the pre-planned number of shares. But after the set number of shares is accumulated, further buying as price head lower will be considered as “negative” averaging down. You can read my previous post regarding negative “averaging down”.
The main reason I want to hold onto $KGJI is that I believe in the long-term prospect of gold. $KGJI has an average of $200 millions dollar plus worth of gold inventory at current market value which estimated to be around $3 per share and yet $KGJI is trading as $1?!? Did you notice that the high volume trades leading to the bottom at 02:25pm also involved a LOT of buyers picking up cheap shares? I wished I was one of them.
Of course, my wanting to hold on to $KGJI for its gold asset is the same reason I’m holding on to $NUGT. I added to $NUGT when price started to bounce from lower opening.
From a weekly chart above, $NUGT is trading in the upper area of the ascending triangle and the overall direction is still up.
$LEU recovered from a dip below $5.
From the weekly chart above, $LEU is still trending upward. Next Thursday shareholder meetings will determine if price will go higher or stay neutral in the $5 range.
$CERS had a down week but price found support at $4.4x.
Because I have a relatively small position, I decided to hold.
$LRAD also had a down week but price is still trading above the weekly 79 & 89 MA lines which to me is still bullish.
With earning announcement coming next Thursday after market close, price action from next Monday to Thursday wouldn’t matter at this point.
Due to negative closings on all position except $NUGT, my port gave back a whopping 3.4% for the day. YTD gain is now at 13%.
LRAD, TZA, LEU, KGJI, NUGT, CERS and 15% cash.
My 2 cents.
Btw, my $ARTH position on my other trading account is beginning to wake up…
From the weekly chart above, notice the high volume this week. $ARTH is not part of my main account because this is an OTC-bulletin penny stock. It is in my much smaller trading account.
Categories: Daily trading Journal