GUNNER24 Trade of the Day 02/26/2020
Stock Market Meltdown / Buy-Stop for GDX ETF at 32.50
Dear GUNNER24 Traders,
Stock Market Meltdown
It is always disturbing when the markets avoid to do what they should do. Yesterday for the Western stock markets a Happy Tuesday and Turnaround Tuesday pattern (or Taylor-Buy-Day pattern...look at the bottom) was expected. However, the coronavirus sell-off continued from open into close.
Today the German Small and Midcaps are dropped. Today Europe continues to melt down. I have never seen that the German Mid-Cap 50 index (Trades 26700 after 29500 alltime-high) shows a 1000 pts loss for the intra-day. It' s pretty much like this here in Europe, very shortly after the virus has arrived in the respective country, the very same day, or the day after the main stock market sells completely crazy. First Italy, last Thursday. Yesterday, the Swiss Index with nice support from the DAX. Needless to say that everywhere any nearest former important supports have been pulverized.
With help of yesterday course we have full confirmation that markets are in panic cycle what is for ES #, S&P 500 emini continuous contract at day 5!
We know that panic cycles tend to run for 7 to 12 time units. And again observing the ES # daily chart it now seems obvious that 3050-3065 pts is getting tested within this panic cycle.
There is major bull market support magnet on daily base:
Volume is insane high. Full panic mode what obviously started at the 3397.50 pts alltime-high. The former support of the thin red line as 38.2% Fib retracement support have been likely finally broken yesterday, consequently 50% Fib retracement support at 3063 pts is activated next important downtarget together with 200 Day MA (Moving Average) and some rising daily bull market supports which all form major bull market support at about 3050 to 3063. Panic cycle usually has to test this major support as it seems.
Perhaps this is due today, perhaps Friday what will be most important closing auction cause week & months ends then. And these coming closings are extremely important! They could deliver major closing base stuff.
Ok. So far we have confirmed downtrend at least on daily base. Together with likely underway 7 to 12 day panic cycle what started likely at important 1-year-cycle high. And within downtrends the Mondays, Tuesdays, Wednesdays and Fridays typically form these daily patterns:
There is no special rule which of these sell or sell-short patterns is coming on which of these days.
It is very common, maybe even a rule that in confirmed downtrends ONLY the Thursdays print the classic buy-day pattern.
Mostly it looks like the above placed typical Friday pattern aka Taylor. A somehow weaker buy-day. Nothing for weak hands!
So, IF tomorrows Thursday is able to hammer a buy-day pattern into daily chart we have get added confirmation that a sustainable daily downtrend is underway. And maybe that even a multiweek long downtrend was triggered at current ATH`s. This is important to know/to feel. Because so far only – despite the massive panic seen everywhere – a „completely normal" backtest down to the 200 Day MA bull-bear trigger could be running.
Some closings below 200 Day MA and Big Money foresees stronger downtrend underway and then good night bulls. Lets do some math: 3397 pts alltime-high minus -10% „TEXTBOOK" bull market correction cycle gives a 3057.3 pts... This is at the 200 Day MA above!
IF February will close below this 3050-3063 usually very strong bull market support magnet we have official VERY STRONG sell signal on monthly base. Then market likely has to continue to sell-off further into about 2700 pts in course of March! 3397 pts minus -20% „Bear Market" definition cycle gives a 2717.6 pts.
Buy-Stop for GDX ETF at 32.50
Easy stuff - This is Powder Keg Setup on DECADE base
GDX, the Market Vectors Gold Miners ETF, tracks the NYSE Arca Gold Miners Index closely.
If the stock markets have to dive even deeper in the wake of a virus pandemic and the resulting economic downturns in the respective economic areas, this scenario should work out for the Gold Miners:
Entire 2009-2019 DECADE the GDX ETF has worked on its green-dotted Cup. Since mid-2018 the rising Cup Support is responsible for the seen higher month lows. Cup is main support of the at 2015 lows started multi-year bull market what is stronger countertrend within overall secular bear market that began at 2011 alltime-highs.
The very last bullish test of Cup Support is seen at this month low (27.77$). So far, also the new 2019-2029 DECADE likes to respect this main support, currently most strongest bull market driver.
Bottoming pattern of the 2009-2019 DECADE is an uber-bullish yearlong Complex Head-and Shoulders pattern with 2 left shoulders and 2 right shoulders ==> SS-H-SS DECADElong bottom.
The test of the decisive Cup Support at this month lows led to the next test of the highlighted small 3 dark-red dotted horizontal lines which all together mean A) determining DECADE resistance, but much more importantly, they are equally important as B) defining resistance for the MILLENNIUM.
==> This month high of 31.84$ is at combined DECADE and MILLENNIUM resistances and we are now experiencing the overall 4th test of this really strong main resistance cluster. And now it can happen that this main resistance nest will be blown away because the actual state of the bull market is showing us that according to the rule of 3 and 4 the time is ripe to head for the next important target of the bull market what is the 39.50$ main resistance horizontal upmagnet (also an combined DECADE & MILLENNIUM resistance rail!).
As things stand today, the fear of a spreading pandemic could trigger an Gold Miners upward explosion. Or, if the equity markets break important bull market supports to the downside, the Gold Miners could explode upwards in return.
We prepare for this possible outcome accordingly. And therefore place a GDX Buy-Stop order quite far above the main resistances. I think a GDX at 32.50$ in course of the coming days/weeks should let the combined DECADE & MILLENNIUM resistance break up finally.
Therefore please buy GDX ETF only as follows:
==> GDX Buy-Stop order at 32.50$! 32.50$ Buy-Stop order is good till cancelled.
==> No SL placement for now!! This will be provided if necessary!
We should get stopped in into a long position in case that this Power Keg explodes upwards!!:
==> Usually the first monthly close and/or 2 consecutive weekly closing above the at 31.85$-31.00$ ranging combined DECADE & MILLENIUM resistance magnet seals a rally move into the next higher main uptarget resistance at around 39.50$ which should be reached within a few weeks.
==> Midterm uptarget of this trade setup is the combined DECADE & MILLENNIUM upmagnet resistance horizontal at 39.50$.
GUNNER24 Trade of the Day orders for 02/26/2020:
Market: Market Vectors Gold Miners ETF (GDX)
Orders: Buy-Stop at 32.50. No Stop-Loss (SL)!! Midterm uptarget at 39.50. Buy-Stop order is valid until cancelled.
Markets, Money Management and Trade Size
I will merely analyze the market. There are so many instruments in the world outside our GUNNNER24 Traders use to trade, and hundreds of popular ones among them, often depending on a trader’s time horizons... I don’t consider me able to adjust the market recommendations to all the popular ETFs, different CFD or futures contracts. All I’ll analyze is pure market action - the index, stock or most current contract and forex!
The trade size you should use depends.
A) On your account size:
I usually follow the rule of thumb which says, never bet more than 1% of your account size for each trade. So I avoid overtrading...
Let’s say you have got a 30.000US$ account granting you a nominal buying power of 300.000US$ up to 500.000US$ and even more, depending on your broker and instrument. In that case your trade size shouldn’t be more than 3.000US$-5.000US$ taking into account your buying power.
Another - more conservative - method is taking into account the available margin. Usually, 30.000US$ account value equals 30.000US$ available for margin trading. So the trade size is 300US$ taking into account the margin.
Within Trade of the Day I ask you not to bet more than this 1% per any trade.
The other point to consider for determining the trade size is:
B) if your trading style is rather active, supposing you regularly have 30-50 open trades, just as I have - CFD/ETF, here some stocks, there a future contract. So I often trade risky somehow, but I split the money/bets. Even in such a nice trend as the stocks are showing currently, I never ever trade too risky. I never load the boat with 70% let 90% of my account size. 50% is the maximum.
I trade for my living and for my kids and wife as well. A regular income is important. The big-bang bet isn’t! The market would win such a big-bang bet for sure!!
When I have a lot of open trades, maybe up to this 50% of my account size/available margin I avoid trading more. So if you are an active trader having a lot of trades running at rev limiter (50% account size) please avoid trading even though we/I give you some fresh recommendations, because this would rise YOUR risk!... During the test phase that happened frequently. We had 3-5 open trades sometimes and that’s why it’s elementary important that we/you have to use tight SL. Order management is absolutely crucial for Trade of the Day.
You’ll have to place really each and every order accordingly, you know. Forgetting only one time the SL would make this trade getting worse and worse…
Based on the George Douglas Taylor Trading Technique that I’ve been studied and originally traded for years transferring it onto the modern markets by constant observation a five day pattern of the single days of the week has resulted.
The crux is not so much that the entire week has to work perfectly. Perhaps it does just at a 50% because the day patterns may shift by one or two days. In the strong upwards trends sometimes you see 4 buy days and only 1 sell day. It’s important to recognize that the day proceeds ideally-typically and to trade accordingly.
My personal trading style has always been the contrary to that of the crowds because the crowds always loose. Especially in gold and silver trading I like to buy the corrections Monday to Wednesday and on Friday if the day patterns correspond with some important GUNNER24 Signals.
I use to go short intraday just on Thursday when the week high is sold off AND provided that the corresponding GUNNER24 Setups signal so covering the shorts when the cycle is resumed.
The ideal five day pattern in an upwards trend – precious metals and US stock market – Do use those patterns for your intraday and swing activities!
Monday: Buy day. Strong up-day. Low established first. It often ends at the day high. Unthinkingly you may buy all the intraday corrections because the week high comes later in the course of the week.
Tuesday: Buy day. Weaker up-day. A higher high is produced. As early as now the crowds ponder whether the prices mightn’t run too high partially going short already. For me it’s the day when I can cover my Friday and Monday longs. In intraday I try to go long in case of corrections until the Comex opening.
Wednesday: Sell day. Actually the day for covering the longs and for the first short entry. It’s got some different forms. It closes at the same level as it had opened. Frequently at first the high is established because more and more traders short the market. Here the longs fight against the shorts. You recognize that if many teeth, many nicks, many spike candles are to be seen in the chart. On Wednesday I use to do nothing. Only at a 20 to 30% the shorter hearts are pleased because during the whole day there’s only sell-off.
Thursday: The classical sell short day. Because the Wednesdays often close as they had opened the market participants have to cover their shorts because in the beginning the market runs quickly upwards…! And frequently they turn their positions into the high direction being caught on the wrong trail again. Then the market often lays down a beautiful sell-off. In the evening mostly a strong rally follows. That’s where we cover the shorts.
Friday: Classical buy day in the upwards trend. It’s nothing for weak hands. Here’s where you buy the positions near the Thursday lows which you cover again next Tuesday/Wednesday. If you discover that the prices have steadied or even are rising a little bit by closing the five day cycle should continue in the following week.
In the charts we work with the following symbols: