SLV

Be careful if you are in a silver trade. The SLV is extremely overbought and is showing signs of a possible pull back. I think that silver could end up going much higher, but it might have a pull back before doing so. I'd wait for that pull back before getting in.

UPDATE

I'm still fighting a cold that I've had for the past two weeks, so this update will be brief. The market paused today....not up much and not down much. The three big commodity trades (oil, gold, and silver) all had bearish reversal price patterns today. They still need confirmation, but don't be surprised if they sell off soon. This will create another opportunity to get in, so I don't mind a sell off. The Dow was down 26 points, but the Dow Transportation Index was up about 20 points. This is good news for the continuation of the uptrend. The Transports can often be a leading indicator for the overall market. There are still more earnings to come out this week. So far, the earning reports haven't shown a very predictable pattern. They are all over the place. If you are playing a trade on an earnings report, please understand that the trade is likely a gamble. I'm not going to tell you not to trade earnings, only to realize that they are high risk trades right now. There have been some great reports that have resulted in big sell offs...and visa versa. I don't have any picks tonight, but I should have some as soon as I see some patterns that I like. CAT and DD, from last week, pulled back a bit today and gave you another chance to get in...although if they drift below their 10 day MA tomorrow, you might want to wait until they start going back up. APKT continues to look strong and closed at a new high today. Thank you for the success stories that you have sent in.

Gold and Silver Update

This post is from Chaz...a commodities trader that writes a monthly newsletter on the precious metals market. He has given me permission to post it on my blog. As a disclaimer...I (and Option Magic) are not responsible for the content or recommendations in this newsletter. Also...a lot of this information relates to trading the actual commodities. There may be some terms or strategies that you don't recognize. This update is meant to be an information guide for those of you that are trading gold and silver...or just the gold and silver ETF's like the GLD or the SLV. This commentary is opinion and analysis. You must still use good money management and trade management principles. You must also read the charts. No one...I'll repeat...no one knows the exact future of any event on Wall Street. You must still do your due diligence. Thank you Chaz.


Good morning traders, Bit of a scare last night. Gmail made some changes and didn't tell anyone. I thought I had lost my entire gold group list. Don't you just love and hate modern technology at the same time? I wish everyone a Happy Easter and ask that each of you take just one minute to reflect on why we have this holiday before the socialists take this away from us too..... (one minute).....Ok, lets get to it. Pull up the July silver chart. You will notice that there are gaps starting at the $29 level. These gaps continue all the way up to the current price. We have what is called an "island top" formation. Read this loud and clear. GAPS ARE MADE TO BE FILLED!!! ...and ISLAND TOPS SINK... . THIS IS NOT A HEALTHY MARKET. Options expiration is next week. PRAY for a correction. We need it badly. If we don't get it, the whole country will be in deep trouble. The profits we have taken over the last 60 days are staggering. The best we've ever done. EVER. If we can return to a healthy market, we will do much more. As I see it, we need to correct to about $32 to $34. Looking at the chart, we SHOULD correct to at least $38, but we NEED to correct to $32 and there is a slight chance we MIGHT correct to $29. A correction anywhere near any of these numbers in the next week will cause many people to have near religious experiences if they are long this market. You should all be out of your core positions and holding only insurance and pipe dreams right now. I am holding $50 calls and $38 puts. I placed these positions weeks ago. DO NOT follow me. It's too late. I am playing both sides of this market. This should only be done by very experienced and advanced traders. ....This is the game plan...IF WE CORRECT by Wednesday or Thursday, try to buy the July AT THE MONEY calls or IN THE MONEY calls. I prefer calls that are at least $2.00 below spot. These usually cost about 10 or 12 thousand each but they are the safest and the least likely to be shaken out of. IF WE DO NOT CORRECT, ...WAIT!!!...until we do. THIS IS A VERY DANGEROUS MARKET. Those of you who are holding physical metal,...DO NOT let go no matter what happens. If it corrects, I believe the correction will be very short lived and we will return to making new highs quickly. This market has a very LONG way to go. The price of silver is going to go much higher than most folks will ever believe. I've been watching this market for 33 years and I know it well. History will record what we are seeing in silver as one of the greatest bull moves in all of recorded time. I simply do not have the time or proper platform to argue my case for this belief but I am very comfortable that time will vindicate me. IF WE DO NOT CORRECT... this market may go totally parabolic. Only those holding physical or long pipe dream options are going to be happy about it. Those of us holding cash ,waiting to get long, are going to be crying like babies and muttering "It isn't fair mommy." I'll repeat. PRAY for a correction. No, it is not blasphemous to pray for the financial health of a nation.( I actually had to answer this question a few days ago.) ....Aside from that, last months update resulted in more responses than ever before from all over the world. Not one was negative. Not even one piece of hate email. I was stunned. I have no idea just how many people read my ramblings but I'm very humbled that so many people forward them. ....God bless you all this Easter season....Happy trades....Chaz

WARNING ON LEVERAGED AND INVERSE ETF'S

Here is an article that I originally posted on the blog in March of 2009. It a warning about leveraged ETF's. I will occasionally trade these instruments, but I think everyone needs to read this article before getting involved in leveraged or inverse ETF's. Here is the link:
http://news.morningstar.com/articlenet/article.aspx?id=271892&pgid=etfarticle

SUCCESS STORY

Hi Jerry,

Feb 25^th 2011 I bought 100 April $33.00 calls of SLV at $1.43 ea. Sold them March 10^th at $3.10 for a profit of $16,200.00 or 116.7%!!

March 9^th 2011 bought 100 July $35.00 calls of SLV at $$3.24 ea. Sold them April 20^th at $9.45 for a profit of $62,100 or 191.6%!!!!

I sold them because I wanted to take some profits but also because I had researched the ETF AGQ. As I understand, AGQ is double leveraged or it moves up or down at double the price of silver on any given day.

So on April 20^th I bought 20 contracts of the AGQ $310.00 May calls. I then got nervous that with only 30 days till expiration I would have too much time decay, so I decided to sell those in favour of a further our expiry.

I sold 6 contracts April 21^st at $48.50 for a profit of $9300.00 or 68% in one day. On Tuesday (conditions favourable) I will sell the remaining 14 May contracts and probably buy

$340. or $350. June contracts.

So to date on Silver I have made over $90,000.00, banked around $45,000.00 and reinvested the balance of my original outlay.

Many thanks for you help and advise.

Kind regards

Richard

SUCCESS STORY

Jerry,

I just doubled my money again on SLV calls, I’ve not sold yet as of 4-21-11. I started buying calls in early march. Thank you Jerry.

Jake

STRONG RALLY

The market finally started its rally. Earnings from INTC were viewed as positive and it gave a boost to the tech sector. There is definitely money coming back into this sector. The positive report from AAPL after the bell today should add to the tech recovery. It wouldn't surprise me to see a lot of tech stocks move higher tomorrow as the short sellers scramble to cover their positions. With the strong move today...and higher volume, we should see the S&P 500 break out to a new high within the next week...maybe even tomorrow. I haven't had time today to analyze many stocks, but I did find two patterns that I like. They are DD and CAT. They are both call option trades. I have a target of $61 on DD and a target of $114 on CAT. If you've had some recent success stories on the GLD or SLV trade recommendations, please email those to me and I'll post them on the blog. Some of you sent in success stories over the last couple of weeks. If I didn't post your success story, please re-send it to me so that I can get it on the blog. These last few weeks have been pretty crazy and I'm afraid that I might have forgot to post some of them. Send the success story email to jerry@myoptionmagic.com. I wouldn't chase GLD or SLV right here. Their charts are starting to move parabolic. If you are still in those trades, you can use a 5 day MA as a trailing stop. If the stock closes below that 5 day MA, you could get out of the position...or at least half of the position.

IS THE UPTREND OVER?

There was some panic selling early on as Standard and Poors basically said that the U.S. was on a path to a lower bond credit rating. Keep in mind that they did not lower the credit rating of U.S. bonds...in fact they affirmed the AAA+ rating. They basically said that if current spending policies remain in place, the rating could be cut in 2013. Today was a classic "sell the news" day. The VIX spiked up early on, but dropped significantly by the end of the day. I'm amazed at the people out there that want to use the VIX when it confirms their outlook, but dismiss it when it doesn't. I've heard many people say lately that the VIX is not a reliable analysis tool. I would agree if it is being used as your only indicator. If you look several indicators, it works very well. The market is vulnerable here, but I don't see today's news as being any worse than the news last month...and the market came back from that drop. From the bullish side, I see a possible inverse head and shoulders pattern forming on the Dow, S&P 500, and Nasdaq indexes. If this pattern holds, the market should start to move higher very soon. On the bearish side...the market rallied off of a very important support level today (1295 on the S&P 500 index, about 12020 on the Dow...although it didn't trade that low today..., and about 2705 on the Nasdaq). If the indexes break below these support levels, the market could have more room to drop. Another bearish sign is the early earnings reports. The market hasn't liked these reports. INTC, IBM, and AAPL will be big this week. If they fail to impress, it might be the ammo the bears need to push the market lower. I didn't see any patterns tonight that I really liked...especially with the uncertainty in the market. We'll see if things get clearer tomorrow.

PROFIT TAKING OR PANIC?

I did say that tops aren't usually formed by "volcano" tops, but that doesn't mean that we can't get a profit taking pull back before going higher. I didn't see any panic in the selling today. The VIX didn't move up much and there was some buying at the end of the day. Oil has dropped over the last two day which explains the drop in energy related stocks. I got stopped out of most of those energy picks from last week. I'll look to get back in if they move back above their 50 day MA. I think there could be a bit more selling in these stocks, but most of them should then move to new highs. I took some profits on my GLD and SLV trades. Looks like I'm in the "profit taking" mode as well. JPM is the big earnings report tomorrow. This should give us an insight on how the banks are doing. I like the chart on JPM. If this earnings report can get the stock back above its 10 day MA, I might buy some calls. We'll see if financials can rally the market tomorrow. GOOG is the big one on Thursday. I think this one is going higher on its report. There is strong support around $550 and the stock has been down most of this quarter. This is a good recipe for a spike upward on a nice report. I'll repeat...earnings plays are a gamble. They can go either way.

THE MORE WE DRIFT, THE MORE LIKELY WE CLIMB

The more the markets drift sideways, the more likely they will move higher. I'm talking probabilities not absolutes. You have heard me talk about "volcano" tops and how rare they are. Most tops are formed with a quick, definitive reversal. Usually when the market (or an individual stock) starts to move sideways, it will usually continue in the direction of the previous trend. This doesn't mean that the market couldn't sell off a bit more in the next few days. If it does, it would likely present a great buying opportunity...provided the selling isn't a 300 point drop with a huge spike in the VIX. Some of the stocks that I recommended a few days ago have started to resume their uptrends. Some are still correcting a bit. There has been some selling in the energy sector over the last few days. This is expected. Many of these stocks broke out to new highs...which is why they were recommended. After a stock breaks out to a new high, it will often move sideways a bit or pull back a bit before resuming the trend. If these stocks start to break below their 50 day MA's, we'll know that there could be a sector rotation underway. I liked the move on CHK today. Lately, the volume on the up days has been higher than the volume on the down days. This is often a bullish sign. I really like the consolidation over the last month. I also like how it closed today at the high of the day. We'll see if this one makes an explosive move soon. I still like the GLD and SLV trades. Have a good weekend.

UPDATE

Of the stocks I posted yesterday...NOV, LAD, SU, APL, ICO, EOG, and KSU all moved below their 10 day MA today. I would wait for them to get back above their 10 day MA before getting into bullish trades. If you are already in the trade, make sure you have defined and planned your stop. I still feel that these stocks will continue their uptrends, but there is no way to guarantee any move. Always have a plan to cut losses if the trade doesn't work out. The fact that money went into financial stocks today is good news for the expected continuation of the uptrend. I've said all along that the market can't make any significant move higher without the financials participating. One day doesn't constitute a trend, but it is a start. We'll see if there is any follow through. On the bearish side...there was a report out today that the percentage of bulls in the market is approaching the 2007 high...just before the bear market started. This could mean that the market is nearing the end of the bull market, but it doesn't tell us exactly when a downturn would begin. I'm going to keep trading the uptrend until I see the bearish signals start to appear again...like a move back below the 10 day MA...or the 50 day MA. Many of the energy stocks sold off a bit today. They needed to. They were up pretty big over the last few weeks. They next few days will tell us if it was just profit taking or a sector rotation.

SUCCESS STORY

I always emphasize paper trading or simulated trading. I say it a lot, but I'm not sure if it sinks in. If you are struggling with your trades, go back to the simulated trading and work on your skills. Remember what I said in class..."focus on being a good trader and the money will follow". Just like an athlete or musician uses practice time to perfect their skills, we too need to use these state of the art simulated trading systems to practice our craft. Here is a success story related to simulated trades. Thanks Michael.

Dear Jerry;

As you know, I haven't had much "live" trading success to date. I wanted to share a few thoughts. First, I have been reluctant to use the Options Express Virtual Trading page for quite some time now. I have now been using it on a fairly regular basis, and can see the importance of practicing, as many of my trades are proving to be "paper" profitable. I believe that using the Virtual Trading has improved my thinking process, enabling me to have profited from several live trades within the past few weeks. Having said that, I would encourage all of my fellow students to practice on the Virtual Site in order to gain the confidence necessary to make the real money trades, which should convert to real money profits.

Good luck to everyone;

Michael / Arizona

IT'S ALL ABOUT GOLD.....AND SILVER

Gold looked like it was ready to break out. I hope you got in last Friday (or yesterday) when I recommended calls on the GLD. If you missed today's move, you should still get a chance to trade it. I think that the GLD will move above $145 or $146 (at a minimum) within the next week...maybe two. I also don't see any major pullback in the market happening any time soon. Now I understand that market conditions can always deteriorate very quickly, but I just don't see anything on the horizon that will topple it. Maybe earning season could cause a reversal (if the news is bad), but that doesn't really get going until April 18th. Alcoa reports on the 11th to kick off earnings season, but then there is a lull for about a week. I still can't believe the market shook off the negative events in March. I just don't see anything bigger than that on the horizon. The Dow, Russell 2000, and the Dow Transports have all moved above the February high. The S&P 500 and the Nasdaq are still below it. This leads me to believe that the overall market should continue to rise...at least until both of those indexes have eclipsed their February highs. Here are some other patterns that look like they are either getting ready to break out, or they have already started to breakout. These are bullish trades. I like CHK, SLW, CDE, WLT, IVN, CMG, CLF, NOV, HES, DNR, VLO, APKT, TSP, LAD, and SU. I also like APL, SWC, ICO, and USO. I like EOG on this latest pullback, but that could be considered a riskier trade since it is still pretty far above its 50 day MA. KSU also looks like it is getting ready for another run up. I recognize that most of you can't get into all of these trades at once (I'm not in all of them), but you can at least paper trade all of them.

SUCCESS STORY

April 5, 2011

Dear Jerry,
Here's some what of a success story.
Four days into a trade- 5 trades- all up with a gain of almost $500.00!

I'll watching these trades for pull backs,(50 day ma) I've got all my target exits and stop losses in place, I'm adjusting them as the trade moves up.

I just reviewed bracket trades, and started doing each trade that way (really makes good practice to set the targets and stops, and only now I remembered you saying this) all the light blubs were going off again. Early on there was just so much information , kind of just got over whelmed.

I only traded 1-3 contracts for each trade, but I can see the potential!!! $$

Thank you again Jerry, your "c" student

Vance O.

SUCCESS STORY

Hi Jerry,

Thanks for another great class!

Here are some success stories:

1. Using techniques I learned from Jerry's Elliott Wave class, I spotted a bullish trend on CPRT.

I made a quick 25% on the calls I purchased!

Davida/Reseda, CA

2. I made 49% literally 'overnight' on a bullish April, 2011 IBM trade, using pattern reading techniques I learned

in Jerry's classes.

Terence/Reseda, CA

3. Proper money management is one of the greatest tools Jerry has taught us.

Sometimes, losing less in a trade can be a sort of 'win,' so to speak.

I bought a call on UHAL and at the same time I sold a put to offset some of the

cost of the trade. Ultimately, I lost $470 on the call... but made $200 on the

put... a $270 loss was a much easier pill to swallow.

Davida/Reseda, CA

Thanks

GOLD

Gold looks like it is getting ready to break out. It looks like it is building an ascending triangle pattern. The confirmation would be a move above $140.60 on the GLD, but I might consider a more aggressive entry. We'll see what it looks like at the close. The initial target would be about $145.