In this Weekend Report would like to show you some very long term charts for some of the precious metals stocks that shows us where we’re at in the big picture. For me it’s important to know where a stock has been so I can have and idea if it’s close to a previous low or high or is it just trading in the middle of no mans land. It just provides perspective that one can use as they can then start to reduce the time lines down to the daily and even hourly charts to help make a decision on where to buy or sell a stock.

When you view these precious metals stocks you will see a lot of potential looking double bottoms that have formed from the June and December lows of last year. Keep in mind in order for these possible double bottoms to complete the price action has to trade above their double bottom humps to complete their bottom reversal patterns. Also look at the RSI at the top of the charts for a positive divergence in many cases. At the bottom of the charts you will see the MACD and the Histogram along with the slow stochastic. Again, on many of the precious metals stocks you will see the MACD getting ready to crossover which will give a buy signal with the blue Histogram, which is approaching the zero line, also helping confirm the buy signal.

So far the move off of the possible double bottoms doesn’t look very impressive yet as these are some very long term charts but you can see the potential is there if these precious metals stocks can continue to rally. With that said lets look at some precious metals stocks and see how the present time frame fits into the longer term look.

Lets start with a chart for ABX that shows the complete history of this stock. You can see the big H&S top that was put in over the last several years and the decline that took place last year. It’s trying to put in a bottom that is actually a little bit lower than the 2008 crash low. If this current bottom can hold then the first real area for resistance will be the big neckline. Note how close the Histogram is to the zero line and the MACD has just given a buy signal with the black line just now crossing over the red line. Keep in mind this is a very long term chart and these kind of buy signals don’t come around very often.

GG was probably been one of the stronger big cap precious metals stocks during the 2013 decline as the current price action is trading well above the 2008 crash low unlike so many others in this sector. The first real test of strength will be when GG tests the big neckline just above. This is only speculation at this time, as the move off of reversal point #4 is just beginning, but I’ve added a “WHAT IF” comment that GG could be forming a consolidation pattern going back to 2008 high just before the crash. As you know I always look for at least four reversal points in a consolidation pattern before it’s complete. What if this is the fourth reversal point being put in place right now that is part of a five year consolidation pattern?

NEM on the other hand is not showing us anything to get excited about. You can see the MACD is still falling along with the Histogram. The price action shows no signs of a bottoming pattern. The only thing positive about this stock is that it’s still trading above its 2008 crash low. NEM is a good producer of some very nice H&S tops which is important when the precious metals complex is topping out. We can always count on NEM to show us a top.

Lets take a look at the history of ASA that has been forming a possible double bottom on the the bottom rail of its uptrend channel. As you can see it’s at a critical juncture right here as the price action is trading right up to the possible double bottom hump. If ASA can break above that DB hump that area should offer support on a backtest. The big H&S neckline is going to be the first real area of resistance if ASA puts in a double bottom. It’s all about taking it one step at a time. There is a nice positive divergence on the RSI at the top of the chart. The MACD just had a positive cross with the Histogram just shy of the zero line.

Lets look at several Royalty stocks as they usually are the strongest in the precious metals sector. RGLD has been trading in a parallel uptrend channel for most of its bull market. As you can see it’s forming a possible double bottom on the bottom rail of the parallel uptrend channel. The 2008 crash low is hardly visible on this long term historical chart of RGLD. This could be one to watch that shows us the way higher. The MACD and Histogram still have some work to do but there is a positive divergence on the RSI indicator at the top of the chart.

FNV is another Royalty company that looks very similar to RGLD. As you can see it’s still trading below the bottom rail of its uptrend channel. What really needs to happen is for FNV to tade back inside the rising channel to negate the breakout. On a positive note it has made a higher high and a higher low which is technically an uptrend. The MACD and Histogram still have a little more work to do before they can offer a buy signal.

SLW hasn’t been around for very long but this stock can really move once it gets going. It could be forming a bullish expanding falling wedge if it can ever trade above the top blue rail. The 2011 high shows up on a lot of the precious metals stocks that suggest that if the PM complex is still in a secular bull market then many of these types of consolidation patterns will be formed at the halfway point. Time will tell. It always does.

This next chart shows the total history of AEM which is quite interesting. I clearly remember this stock being one of the first PM stocks to start its bear market. Note the brown shaded support and resistance zone in the middle of the chart that held resistance until AEM finally broke through in 2005. Notice how this S&R zone has reversed its role and has held support ever since. As you can see it was tested from the topside once in 2008 and again just recently. Here you can see a possible big blue rectangle that maybe forming with this latest bottom being the 4th reversal point. The MACD has just had a positive cross with the Histogram well above the zero line.

GSS has had several good moves during its lifespan but has always given back the gains. As you can see it has just bounced off the brown shaded support zone which has launched several good rallies in the past. It’s currently testing the possible double bottom hump that it needs to break above to confirm a double bottom is in place. The MACD has just had a positive cross and the Histogarm is above the zero line.

NGD hasn’t been around very long but it really had a good rally off of the 2008 crash low. This stock shows another example of a possible bullish expanding falling wedge that began at the 2011 high. As I stated earlier, if we’re still in a secular bull market for the precious metals complex, I would view the blue expanding falling wedge as a halfway pattern to the upside.

These last two precious metals stocks were the first ones on my radar screen that suggested a bottom maybe forthcoming in this sector. SSRI is now starting to trade above the double bottom hump which is a big deal. As this was one of the first PM stocks to bottom I expect it to show the way higher. SSRI was one of the first PM stocks to cross on the MACD. The Histogram is also trading above the zero line. On the long term charts this is what you want to see happen.

AU is the other PM stock that caught my attention early on as one of the leaders coming out of the bottom. Notice the brown shaded support zone at the bottom of the chart that has led to several very strong rallies. Also notice the clean breakout above its double bottom hump which now should offer support on any retest. The MACD has a positive cross and the Histogram is above the zero line.

I would like to show you one last chart which is for the XAU that I’ve shown you before. The XAU, which has the longest history for the precious metals stocks indexes, is also building out a possible double bottom which would be the 6th reversal point . Note, the little spike below the bottom rail of the rising wedge, at reversal point #6, which now looks like a bear trap.

There are many more precious metals stocks that are showing more positive chart patterns in the junior’s sector. The juniors have really been leading the way higher with some of them making some pretty impressive moves so far. There are a lot of positive things going on in the precious metals sector right now that is very encouraging. There is still a lot of work to be done before we can definitely say the worst is behind us but so far in 2014 things are looking much brighter than the dismal year of 2013 for most of the precious metals stock investors. A reversal has to begin somewhere and this area looks like as good a place as any in which to begin a new leg up. So until something changes some of these charts above, to the negative side, we have to give this new trend a chance to show itself and see what happens. All the best…Rambus

This stock has been on my radar screen along with about 25 more small cap PM stocks that I haven’t had room to buy for the Junior Portfolio. This stock is a good example of why a person needs a big basket of these little Juniors because you never know which ones are going to really takeoff. Everyone has their own idea on how to play these little guys but from my experience it really pays to buy a big basket of these very volatile stocks.

I have had three different, 400% to 500% portfolios gains, starting back in the spring of 2002 by buying a big basket of at least 15 junior stocks. One portfolio didn’t have one stock over a dollar. I truly believe we are embarking on another one of these 400% to 500% gains in the precious metals junior stock portfolio as they have been so decimated. Actually many topped out in 2004 and 2005 with many more topping out in 2011. If you’ve been following the PM complex for many years then you know exactly what I’m talking about. This is what we live for, another opportunity to do this all over again. I know most of our subscribers come with a precious metals complex background so this isn’t new to you but if you’ve never participated in one of these big moves in the juniors they can be something to behold.

I strongly urge you to think about this. If you make some money in the Kamikaze Portfolio take some of those profits and start putting them into some if these juniors precious metals stocks. You will still get a lot of leverage without the pressure of watching the volatility in the Kamikaze Portfolio. In the early part of this bull market these rallies generally lasted about one year from trough to peak. If December marks the low then we are already several months into this new impulse move higher. We never know 100% for sure what the future holds so all we can do take advantage of a good setup until something tells us it’s broken. Right now, by looking under the surface of the precious metals stock indexes, there are some very encouraging signs that tells me this could very well be the start of a new impulse move higher. We’ll know in hindsight.

The daily chart shows the big blue 5 point downtrend reversal pattern that was broken to the upside in January and did the backtest in the early part of February. There was no way to know what would happen next but as you can see the price action just went vertical right after the backtest was complete. At this point I would be looking for some type of consolidation pattern to form to digest the recent gains. I put on the Fib tool that may show you where the 2nd several point may come into play. It would be nice to see a decent consolidation pattern of several months form so it can charge forward again. Two steps forward and one step back.

The weekly chart shows you why this stock stopped going higher. The sharp rally hit the top rail of the expanding downtrend channel and is backing off telling us that top black rally is still very HOT. A break of the top rail will signal the bear market is over for this stock and would be a good place to buy or add more shares.

In this Weekend Report I would like to show you the Chartology of silver that you won’t see anywhere else on the planet. Some of these charts might not conform to the classic textbook scenarios most chartists believe are the only correct ways to construct a chart pattern. I have learned through many years of charting the markets that there are areas in this field that can be opened up for further interpretation and still fall within the loose confines of what is considered a chart pattern. Keeping an open mind in any of the trading disciplines of the markets from Elliot Wave, to cycles or charting can give one more insight and clarity than any one book can give you. Real time analysis and interpretation is the only way to really get to know your chosen field for investing in the markets.

With that said lets look at some silver charts. We’ll start with the short term charts and work our way out to the very long term charts that hopefully will put what silver is doing right now into perspective . When you look at the quarterly chart going back to the 1970’s, What happened those many years ago still has a direct impact on what is happening today , even though this seems impossible.

Lets start with a 10 month daily chart for silver that has a lot of information on it. If you’ve been follow the precious metals sector you know that silver had a huge day on Friday February 14. Happy St. Valentine’s day silver.

What makes Friday’s big move so special? There are several very good reasons. First, silver broke out from a red 2 1/2 month long rectangle reversal pattern to the upside. This breakout also took out the brown shaded support and resistance zone that had been in place since July and August from last year. Note how the brown shaded support and resistance zone acted as resistance back in August and then once it was broken to the upside it reversed its role and held support back in October and November. This support and resistance zone gave way to the downside when silver made its ultimate low in December, again reversing its role from support to now resistance. As you can see on the chart below silver was unable to penetrate that brown shaded support and resistance zone until Friday of this past week. For 2 1/2 months silver was trapped in the narrow rectangle while the precious metals stocks were racing higher. The top rail of the downtrend channel was also taken out this week which has now cleared the way for silver to run higher. Whenever you see a huge spike like we seen on Friday this tells us the bears have become exhausted and have no fight left. If you want to kick them while their down now is a good time to get your licks in.

This next daily chart goes back about 1 1/2 years that puts the downtrend channel and the red rectangle into perspective. Note the last bar on the bottom far right hand side of the chart that shows you what a breakout looks like. These kinds of days don’t come around very often but when you see such a day take notice as it usually means something significant has happened. The other important feature on this daily chart is the possible double bottom that maybe forming. You can clearly see the June and December lows that formed in the same general area. Silver along with gold are both showing this same setup. I believe they are going to do one of two things. First, this possible double bottom will be the reversal pattern that reverses the almost 3 year decline in silver. Second silver could be building out a large consolidation pattern that will eventually break to the downside. The August high of last year will be the key to which pattern wins out. For the time being though we have a nice rally getting underway that should take the price of silver back up close to the August high around the 25 area. At that point we’ll have to reevaluate the situation again and take it from there.

There has been a chart pattern we’ve been following, at Rambus Chartology, that was a blue 6 point Diamond consolidation pattern that has shown up on gold, silver and precious metals stock indexes. They had all the characteristics of playing out to the downside but a funny thing happened on the way to the Bottomz Inn. After they broke to the downside, as we anticipated, they slowly started to form a small chart pattern that ended up being a reversal pattern before the Diamonds could fulfill their measured move. This is how the markets talk to you. When you see a beautiful setup and it starts doing what you think it should do but then doesn’t follow through you have to take notice. The only way you can do this is to keep and open mind all the time as there are no absolutes in the stock markets. As you can see on the chart below the 6 point Diamond, the bottom dashed rail was the original bottom of the Diamond pattern. I just made two changes to the original 6 point Diamond. First I extended the top rail down to the apex keeping the same angle. The biggest change was the solid blue rail that starts at reversal point #3 and catches reversal points five and seven which creates a reversal pattern to the upside.This is a classic Example of a Morphing Pattern . What initially appeared to be a breakout to the downside of a perfect diamond turned out to be a Diamond of another cut . This is a very big deal because it now gives us a very nice reversal pattern that has formed after an almost three year decline. A Diamond Bottom . I will show you what I mean a bit later.

This next weekly chart shows you why this seven point Diamond reversal pattern is so important. This weekly chart goes all the way back to the all time high made in April of 2011. You can see silver formed another beautiful Diamond, the 8 point blue Diamond, that was a halfway pattern. Keep in mind an even number of reversal points creates a consolidation pattern and an odd number of reversal points creates a reversal pattern. Notice the big long bar on our red seven point Diamond reversal pattern. I will show you why I think this could very well be the bottom for silver on the charts to follow.

Below is basically the same chart I showed you above but this chart has a downtrend channel in place. As I mentioned above that the blue 8 point Diamond was a halfway pattern to the downside. By that I mean it formed in the middle of the three year downtrend channel. Many times these types of halfway patterns can measure out a price objective pretty close. In this case you can measure the distance between the first two blue arrows and add that distance to the last reversal point on the blue Diamond at reversal point #8 to get your price objective down to the 18 area. Once the price objective is reached the stock can do one of two things, First it can form another consolidation pattern, which the red Diamond could have been until last Friday. Or it can form a reversal pattern. With silver’s big move on Friday I have to give a really big edge to the red Diamond pattern being a reversal pattern to the upside instead of a consolidation pattern.

This next chart shows you why I think the red 7 point Diamond is a reversal pattern. On the left hand side of the chart you can see the red bullish rising flag that I measured using the breakout to breakout method as explained by the red annotations. As you can see it nailed the top of the bull market close to 50 which said that part of the bull market was over and started the three year decline. On this chart I’m using a rectangle as a halfway pattern to the downside which corresponds closely to golds 22 month rectangle. You can see the spike up through the top rail at reversal point #4 which I used to create the Diamond. In either case the price objective as measured by the blue arrows, and which I call an impulse measurement vs the breakout to breakout method, still has a price objective down to 18.64 which is still very close to the actual bottom. So we had a halfway pattern that nailed the top of the bull market at 50 and now it’s looking like we have another halfway pattern that maybe telling the bottom is in. I still have a couple of more chart to make the case that silver has indeed made an important bottom.

We started out by looking at some daily charts for silver that showed the red rectangle reversal pattern that was made at the bottom of this three year decline. We’ve looked at the blue 8 point Diamond consolidation pattern that gave us a price objective down to the 18 area. The red Diamond has 7 reversal points making it a reversal pattern to the upside that has formed at the price objective of the blue 8 point Diamond halfway consolidation pattern at eighteen or so. Now I would like to show you a couple of very long term charts for silver that I think will seal the fate for the bottom being in place.

Below is a very long term Quarterly line chart for silver (in Log Scale) that goes all the way back to 1970. Keep in mind the price objectives that I showed you on the charts above that show how the 18 area could be the bottom. This chart doesn’t need any more explanation as you can see why 18 is such an important number.

This last chart is the same chart above but this time I’m showing it as a bar chart. When we shorted the precious metals complex starting in December of 2012 there was one thing I kept repeating as we went lower. I kept saying, look for reverse symmetry. What this means is how a stock goes up, especially in fast moving market, they will reverse symmetry back down through that same area when they finally top out. That helped us out immensely during the PM crash last year. We knew where we were in the big picture which is very important to know. This long term chart for silver, that goes all the way back to 1970, shows how silver’s bull market has reversed symmetry back up vs how it went down in the early 1980’s. You can see three distinct H&S bottom patterns where each had a breakout with a backtest. Next I would like to focus your attention to neckline #3. Is this just a coincidence that the backtest is taking place at the 18 area after all the reasons I’ve shown you from all the charts above? I don’t know about you but this sure looks like a good low risk entry point if one wanted to buy some silver.

We never know until we can look back and see 100% for sure where a bottom or top took place. This whole scenario may blow up tomorrow but until it does I have to go with what the Chartology is telling me today and that is a very important bottom has formed or is forming based on all the charts I’ve shown you above. As I stated in the first paragraph that my charting techniques might not go by the book but I always try to paint a picture, using charts to explain what I think is happening. We must listen to the language of the Mr. Market to get an advantage in one of the toughest games there is to play on the planet, All the best…Rambus

I Sold half my USLV Position

Fully (class dunce)

Before we get into tonight’s charts I would like to explain what my goal is right now for the precious metals complex. We never know 100% for sure when we have a bottom in place. All we can do is look at the charts and indicators and try to get the odds in our favor on when to make a move. For the short to intermediate term I think we have a decent bottom in place in which we can try to take advantage of a move higher.

The hardest part of getting on board for an intermediate move is in the very beginning stages. First you have to identify a bottom, in the case of the precious metals complex, and then you have to start buying. Think of these impulse moves as two steps forward and one step back. We have just had our two steps forward and today marks the point of a possible one step back. This is normal market behavior. Giving back some of your hard earned gains makes you feel uncomfortable and you get this feeling, in the pit of your stomach, that you must sell. If we are truly in an impulse move higher your mentality should be to buy weakness. When your in a trading range is the time to sell into strength not in an impulse move. These are two completely different techniques. Right now I think we have entered at least an intermediate term move in the precious metals stocks and that is how I’m going to play this move until something tells me different.

My experience has taught me to trade the intermediate term move and hang on for dear life when things start moving both going up and coming down. This is where the big money will be made IMHO. Those that try to trade in and out will get a few good trades off but will eventually get out of sync with the move and find themselves on the sideline when the heart of the move takes place. I know for a fact that this is already happening with some of our subscribers that decided to sit out the move in some of the 3 X long eft’s we’ve been buying for the intermediate term move.

This is the point where one has to decide on which type of trader they want to be. If you want to be a short term trader then you really need to be disciplined and follow your system to the letter. If you chose to be an intermediate term investor then you need to get positioned for the longer haul by buying your favorite precious metals stocks now. You need to have the mindset that there are going to be corrections along the way but you have the confidence in the trend to hang on. It takes a lot of discipline and courage to ride out these inevitable corrections but that is the only way I know to make the big bucks. With that said lets look at some charts and see what they maybe telling us.

Lets start by looking at a daily chart for gold that is showing us a potential inverse H&S bottom that is the second bottom of a possible much bigger double bottom that goes back to the June low. This is exactly where one wants to see one of these reversal patterns form. If you recall gold made that very small double bottom, in December,  that is now the head portion of the bigger inverse H&S bottom. Note the little unbalanced double bottom that was made back in June of last year that started the bottoming process and the small H&S top that was made at the 1430 top which I’m labeling, for the time being, as the double bottom hump. You can see how important the 1430 area is going to be for our intermediate term move. Note the last two bars on the far right hand side of the chart that shows the price action for gold doing a ping pong move between the 150 dma and the neckline. This is a big deal folks. Its showing us two very hot lines right now, one that is resistance and the other support. As I’ve shown you many times in the past when a stock is trading up against an important trendline, that is acting as resistance, you often see a smaller pattern form just below that important line of resistance. A moving average is no different than a trendline as they both can act as support or resistance. What makes me think that gold will break above the 150 moving average is the inverse H&S bottom that is forming just below it. If gold does in fact break above the 150 dma that will be a very big clue that gold has some legs to run higher.

Lets look at the long term monthly chart for gold that shows our possible double bottom that is forming at the bottom of the big blue expanding falling wedge. The first bottom was made in June and the second was made in December. If you ever looked at a chart and said to yourself, ” man I wish I would have bought at that bottom.” Well folks this is how you do it. You never know 100% for sure if the bottom is in place until you can look back in hindsight. A year from now will we look back at this chart and say, yep that was the bottom. Only time will tell. It takes guts, some luck and a whole lot of discipline to buy into any important bottom because the news is always the worst. Risk is always part of the equation also.

Lets now take a look at silver that is slowly grinding its way ever so slowly higher. As you can see it has broken above the top rail of the blue downtrend channel with a clean backtest. It’s again testing the top rail of the red 2 and 1/2 month old rectangle. It’s also trading above the 50 dma. Is it to forming a double bottom just like gold? We’ll know in hindsight.

Lets look at a long term weekly look at silver that shows it finding support at the brown shaded support and resistance zone. As you can see it has held support twice so far which is possibly forming a double bottom. Until silver and gold for that matter, can trade back above the bottom rails of their 22 month old rectangles, the downtrend will remain in tact. For the intermediate term move, I’m looking for the old high that was made back in August of last year, to be our first price objective. At that point we’ll have to reassess the situation and take it from there.

Below is the gold and silver combo chart I’ve shown you several times in the past that shows the trading action since they both topped out in 2011. I want to focus your attention to the two red horizontal trading ranges at the bottom of each chart. As you can see gold has been stronger than silver as it’s testing its mid line while silver still hasn’t broken above its thin black dashed horizontal S&R rail yet. The red horizontal trading ranges clearly shows you what my goal is for this intermediate move which is the top red rail. Again we’ll have to see what happens if we get there.

Below is a daily chart for JNUG that shows our three buy points so far. When we took our third buy on Monday I put an order in to but 1000 shares on the backtest to what I hope will be the neckline of a very large inverse H&S bottom. Notice the smaller inverse H&S bottom that now makes up the head portion of the potential very large inverse H&S bottom. So far this move is going as expected.

This next chart for the JNUG is a “What would you have done chart” that shows the last 7 buy points on our last trade setup. The green rectangles shows where we bought . As you can see there were 7 green rectangles that show the buy points and the one brown rectangle that shows where we sold. There were 6 positive trades below the brown rectangle and one losing trade above the brown rectangle. My question is, what would you have done in this situation? It’s easy to see in hindsight what to do but in real time it’s a much different story. At any rate I just wanted to show you this can be a game of inches sometimes where you can be so close but so yet far away. As you know we have taken on three new positions so far, purple rectangles, to try and get back in sync and if we get a complete backtest to the neckline we’ll have our fourth.

Lets look at one more chart as it’s getting late. The last chart I would like to show you is a weekly look at DUST which is a 3 X short the big cap PM stocks etf. If the blue bearish rising wedge plays out as a halfway pattern to the downside we should see a price objective down to the 12.32 area.

So far nothing is broken for our long positions in the precious metals complex. As long as the support rails do their job we just have to hang on for the ride. Remember two steps forward and one step back. All the best…Rambus

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In this Weekend Report we’re going to look at some short term charts for the precious stock indexes and try to decipher if this congestion zone they’ve been trading in for the last two weeks or so is a consolidation pattern that will allow the price action to rally up to the next area of resistance or is this two week chopping action actually a topping pattern and the precious metals stocks are in for another rough go of it. Man that was a long sentence.  The sooner we can figure out what has been building out over the last several weeks the sooner we can take advantage of the situation.

Many times a line chart can give you a quicker entry point vs a bar chart.  As we’re looking at the short term, two weeks or so, the first set of charts I want to show you is a 30 minute line chart. A line chart can take out a lot of the nose, such as a spike high or low, that can change the looks of a chart pattern quite a bit. It just uses the closing price for whatever time period you are looking at, in this case it will be the 30 minute charts.

As you know in the last hour of trading on Friday I started to build a position in the PM stocks based on what I was seeing on the line charts. I was waiting for a decent break and finally got it toward the end of the day. The breakout is small yet but there was also a backtest to the top rail if you look real close.

Lets start with the XAU that shows us a four point bullish falling wedge with the really small breakout and backtest. Keep in mind the XAU is not the leader right now so this little breakout and backtest is important IMHO. Also when you look at these 30 minute charts notice the area at the bottom of the charts that I’ve labeled as “Nice Base.” If you, recall when the area under the black dashed horizontal rail was being put in, we were seeing small reversal patterns such as a 5 point bullish falling wedges and some rectangles. They will be easier to see on a bar chart. The point is we do have a base in place which has broken out to the topside. The price action has rallied up to form a consolidation pattern and that consolidation pattern has broken out to the upside. So far this is an uptrend. The real confirmation will be when the price action trades above the previous little high in this consolidation pattern.

Keep in mind these 30 minute line charts are giving us a different perspective of what you will see when I show you the two hour bar charts a bit later. The GDM is still trading inside its consolidation pattern but is trading up toward the top. It is actually showing some relative strength to some of the other PM stock indexes.

These next two charts shows a completely different look than the two above. I think Miss Patty caught on to this pattern early on in their development. I’m referring to the Diamond consolidation pattern because these Diamonds have 6 reversal points. As you can see on the GDX chart below the breakout from the Diamond is well into its breakout move. We can’t rule out a backtest but the breakout looks good so far.

Below is the HUI and its Diamond pattern. I left my original annotation on the chart that says, Expanding Triangle. The reason I left it on the chart is because when a Diamond is forming it starts out as an expanding triangle. Also the HUI is the weakest of the PM stock indexes right now, as you can see by how far down it’s from its high.

This next chart for the GDXJ shows you why I think the precious metals stocks are going to breakout to the upside. As I’ve been showing you the little juniors have been stealing the show from the big cap PM stocks. Last Friday was a crucial day as the apex of its triangle held support and the GDXJ took off closing at a new high for his move. That is the confirmation I wanted to see.

This next chart is a 2 hour look at the GLDX which is a junior gold explorers etf. Again you can see how these small caps are leading the way. It wasn’t until the end of the day that we got the breakout from the H&S consolidation pattern but we got the breakout. Notice the volume bars at the bottom of the chart.

I won’t go into much detail on these 2 hour bar charts for the precious metals stock indexes as they are pretty self explanatory. When you look at this next set of charts notice the volume bars that were left at the end of trading last Friday.  GDM.

I left in the original 5 point bullish falling wedge reversal pattern that I know most of you have already forgotten about. It was this little pattern that reversed the downtrend that started at the top of the right shoulder high on that massive H&S top. As you can see it’s now is part of the base.

The GDX cracked its top rail at the close on Friday.

When you compare the GDXJ to the big cap PM stock indexes there is no doubt who is leading the charge. I know a lot of folks don’t like to trade these little guys but they have been very good to me in the past. I know some of you who traded them back in the early days of their bull market know what I mean. They have been so out of favor for so long they are playing catch up right now.

Below is a daily look at the GDXJ that should put a smile on your face. How many remember the red 5 point rectangle reversal pattern? As you can see it’s now the head portion of a nice inverse H&S bottom. Note the breakout of the neckline last Friday on really nice volume. This is what we’ve been waiting for.

Before we move on there is one more small cap index that I showed you a while back that was busting a move higher as it was going vertical, at least on the minute charts. You can see the move up on the right side of the chart that went straight up to the neckline and then pulled back. It’s now making another run toward the neckline. This could be a very large base being built here going all the way back to April of last year.

Lets put that possible H&S bottom into perspective by looking at the weekly chart. Here you can see the multi year blue falling wedge with the possible H&S bottom forming at the very bottom. As I have shown you in the past, many times the left shoulder and head will be inside the falling wedge and the right shoulder will form as the backtest to the top rail. Since this H&S bottom is made up of two heads it looks like the right head and right shoulder are forming as part of the backtest.

Below is another look at our possible H&S bottom. This chart I called my reverse symmetry chart as the price action was reversing symmetry down until our current and possible H&S bottom started to form. Folks this is what you want to see at the end of a long move down, a reversal pattern of some kind. Note the beautiful H&S bottom that formed after the 2008 crash.

If the PM stocks look like they maybe heading higher lets take a close up look at gold and silver to see if we can see any clues that may help the cause. It sure looks like the GLD is building out an inverse H&S bottom with a horizontal neckline. Friday’s price action closed just below the neckline so it’s very close but not quite there yet.

Lets look at one more chart  that shows the SLV still trading inside its 2 month rectangle. What is interesting is that it’s working on the 5th reversal point right now. If the SLV can take out the top rail we will have reversal pattern in place that is reversing the downtrend. It still has some work to do but it’s getting there.

I’ve been going over many of the junior mining companies and have narrowed the list down to about 30 or so. Our computer genius has been out of town this weekend but my plan is to start another portfolio, with $100,000, that will be strictly for the small caps, say under $5 a share. This will be a mostly buy and hold portfolio for up to a year or so. The rally phases in the early part of this bull market generally lasted a year from trough to peak. Even if audept doesn’t get to setting up the new, Junior Precious Metals Stocks Portflolio, I will be posting some buys in the very near term. There are some very good looking stocks out there that are starting to get away from us. With these juniors the leverage goes down very quickly once they start to move.

This should get everyone up to speed on what I’m seeing in the precious metals complex right now. We’ll take it one step at a time. As long as they’re moving in the right direction we’ll go along for the ride.  All the best…Rambus

Before we get into the charts I have seen several questions on what type of trader is Rambus. There are basically three types of traders. The short term, the long term and the intermediate term. I’m an intermediate trader that looks for the impulse move when a consolidation, top or bottom is confirmed. It’s those moves where you can make the most money in the shortest period of time.

The markets are either building out at top, bottom or consolidation pattern at any given time. This is where it’s much harder to make profitable trades because they are in chopping mode with no real trend, just short term moves going nowhere. It’s when these tops, bottoms or consolidation patterns are completed is when you get your impulse move and a trend to follow. Being in an impulse move is much easier psychologically because the chopping action has finally ended. On the other hand, during an impulse move, you will run into small consolidation patterns that form along the way that many think is the end of the move but in most cases it’s just a pause that refreshes.

What frustrates most investors is the waiting game when the markets are building out these tops, bottoms and consolidation patterns. They want action now. These patterns can be traded but you have to be very nimble and quick so most traders get eaten alive. Sometimes it’s easy to see that you are in a clearly defined consolidation pattern for instance and know exactly where the breakout will occur. Then, there are the more complex consolidation patterns that morph many times before it becomes clear what kind of pattern it’s forming. We have been in one such pattern since the June low in regards to the precious metals complex. It has morphed at least three times so far and it still isn’t giving us a clear cut signal that it’s finished.

We have attempted several trades within our current congestion area and have been lucky enough to come out with a small profit. We were setup though for an impulse move that failed to materialize so we had to abort these trades with a small gain. My goal is to be mostly setup for the impulse move before they begin. This means taking some position while still in the congestion zone. Sometimes you win and sometimes you lose but if you can keep your loses to a minimum, during these chopping phases, and can recognize when the real impulse move begins, that is what the intermediate term trader looks for. What we experienced from December of 2012 to August of 2013, shorting the precious metals complex, is a prime example of what I’m trying to accomplish right now. We just haven’t gotten confirmation the congestion area is finished building out which could be a consolidation pattern to the downside or a reversal pattern.

Lets take a close look at GLD from the short term to the long term to see if we can find any clues as to where we are in terms of a top, bottom, or consolidation pattern. It’s very important that you look at all time frames to get a feel of where you are in the big picture especially if your an intermediate term trader. Below is a two hour, two month chart that shows us a six point bearish rising wedge that broke down late last week. If you recall I became somewhat positive on the PM sector when I seen the double bottom that started the building process of the rising wedge. As you can see the double bottom worked out beautifully as the breakout above the double bottom hump was accompanied by an nice gap. Next we got our confirmation when the price action did a double backtest to the double bottom hump. All systems were go at that time. I had no idea of what was to come next only that GLD had put in a nice little double bottom reversal pattern to the upside. When you hear me talk about following the price action that is exactly what I mean. In hindsight now we can see the result of that little double bottom that took the price for GLD from 114 to 122 or so.

Next I would like to put our little blue rising wedge into perspective by looking at a 2 hour line chart for GLD but this time it goes back about nine months or so that shows how it’s just part of a possible bigger pattern. Starting at the June low on the far left hand side of the chart you can see there was another small double bottom that was the start of that blue bearish rising wedge. If you recall we went long back then and caught some of that move in the blue raising wedge. I remember looking for a slightly higher price objective as I was using a parallel channel. When the price action failed to reach the top rail and broke below the bottom rail I knew the trade was over and we exited the trade with a small profit. What we have developing right now is a possible triangle formation. We have completed 3 reversal points with the possible 4th starting last week. The fourth reversal point won’t be completed until it touches the bottom rail plus the last reversal point is always the hardest to spot in real time because you won’t know until you can look back in hindsight and say, ” yup that was the last reversal point.” If the price action breaks above the top black rail of the possible triangle formation that would be a very bullish development and we would have to exit our short positions. As you can see there is a very fine line between being a bull or a bear when you look at the top rail of the black triangle. It is also the lowest risk entry point, which we took, because of that line in the sand.

Lets look at a daily chart for GLD which shows our 2 blue bearish rising wedge, three fanlines and a possible double bottom. The further you go back in time the bigger the picture is you have to work with. The fanlines did a good job of keeping the downtrend in check between the two blue rising wedges. We have to keep an open mind as the June low and the December low were made at the same low on the chart. We can’t leave any stone unturned when it comes to looking for clues that may help us make the right decisions.

This next chart shows why the GLD is stalling up here in this general area. Note the brown shaded support and resistance zone that is working as resistance right now. Again if the GLD can trade above that brown shaded support and resistance zone it will be talking to us. Right now it’s up to the bulls to prove their case.

Next I would like to show you our possible blue triangle again in the short term and then using the same chart going back in time so you can see what I’m referring to when I talk about being in an impulse move where, in this case the impulse move is down, and the smaller consolidation patterns that form along the way in a true impulse move. Keep in mind I built these patterns in real time as the impulse move worked its way lower. The first chart is the short term look.

This next chart is the exact same chart I’ve been using for many years. All the old chart patterns and annotations are still where I left them as the GLD has moved on in time. The first thing I would like you to note is how much smaller the consolidation patterns are vs our current and possible blue triangle consolidation pattern. Those small consolidation patterns formed during the impulse move down. In this case there were about four that were made before GLD hit the bottom and built the first pattern inside our big blue triangle, the red bearish rising wedge. Many times after you have an impulse move a consolidation pattern will form that is much bigger than any of the smaller consolidation patterns that formed during the impulse move as this chart clearly shows. These bigger consolidation pattern will often be a halfway pattern that separates the first impulse move down from the second one which hasn’t happened yet for GLD. If the GLD breaks below the bottom rail that could very well signal the next impulse leg down is underway and and the big blue triangle will most likely show up halfway between the two impulse legs when we look back in hindsight.

This next chart for the GLD goes back over  six years and shows you the really big impulse move up off of the 2008 crash low. Just as I showed you on the short term daily chart above, all the smaller consolidation patterns formed in golds impulse move down, just the opposite happened when gold was moving higher off the 2008 low. Here you can see when each of the consolidation patterns completed, a strong move up occurred. GLD did this all the way up to its all time high where you can see the finial thrust higher was nearly vertical after breaking out from the last little red triangle. Then the chopping action started which eventually turned out to be a topping pattern. No one knew with any certainty if that chopping action was going to be just another consolidation pattern to the upside or a topping pattern which would change the character of the whole bull market. I was lucky enough to get out of Dodge and wait for awhile to see what might happen especially after that near vertical move which I know can be the end of something that was very good. After the small top formed and GLD had its hard break down it then went on to form a 22 month six point beautiful rectangle consolidation pattern to the downside. That confirmed for me that the GLD was truly in a bear market. Now we have a possible triangle formation that could very well be a halfway pattern for the second leg down. The only problem we have right now is the blue triangle hasn’t completed its fourth reversal point yet. Until that happens we have to respect the fact that anything can happen. We can lean toward the bearish camp because of the downtrend GLD has been in. If you look at every short term top that GLD has made since it broke down from the last reversal point inside the black rectangle you will see every top is lower than the previous top. That’s a downtrend period.

Lets take a quick look at the weekly chart for GLD that I’ve shown you several times in the past that shows a possible sideways trading range that maybe in play. I’ve shown you how important that top rail is on our blue triangle and this weekly chart shows you why. The red dashed down slopping line is the top rail of our possible blue triangle. If GLD can breakout above the red down slopping line then there is a good chance that it will make up to the previous high around the 137.50 area. Whatever it decides to do we’ll be ready for it. It just has to show us its true intentions which right now are still suspect.

Believe it or not there is still another triangle I can make a case for that I’ve been following since it broke down about 12 weeks ago. What I’ve been looking for is for GLD to put in a lower closing low on the weekly chart. This week we came pretty close to doing that. I believe when we see that, that will tell us the backtest is finally finished and the next impulse move down will be ready to begin. I’ve put two different price objective on this weekly chart if this red triangle turns out to be the halfway pattern.

This last chart for gold is one we’ve been following for sometime now that shows a possible very large H&S top pattern. So far we have no confirmation as the price action is trading right on the neckline. If gold ever does take out that neckline we’ll be the first to know that a really big drop is forthcoming as that possible H&S top has a price objective down to the 700 area. The symmetry is definitely there with the neckline symmetry rail showing us the high for the left and right shoulders just as it did when gold put in its H&S consolidation pattern back in 2008.

So far we have a lot of nice looking charts but we have no confirmation that the next impulse leg is starting yet. All we can do is take some small bites  from the short side as that’s the main direction of the PM complex right now. It could change tomorrow and if does we’ll change with it.

Before I end this Weekend Report I want to show you just a couple of charts for the SPX, using it as a proxy for the rest of the stock markets, which we may trade based on its current setup. The first chart is a 2 hour chart that shows us a possible unbalanced H&S top in place. The right shoulder is quite a bit smaller than the left but in fast moving markets the right shoulder can be much smaller. You can see the price action really bouncing between the top and bottom blue rails in a frantic attempt by the bulls and the bears to gain control of the situation. If the neckline is broken to the down side the price objective will be down to the 1700 area.

I just want to show you one more chart for the SPX that is a possible 5 point bearish expanding rising wedge. Note the little red rectangle that has been forming just below the bottom blue rail. We also have a double top in place which is a reversal pattern.

Tomorrow I’ll go into more detail on what I’m expecting with the stock markets over the intermediate term time frame based on the SPX. Now its time to get ready for the Super Bowl and relax for a few hours. Enjoy the game.  All the best…Rambus

There is a lot we could discuss in this Weekend Report from the price action in the US stock markets to the world stock markets. As we are almost fully invested in the precious metals complex, and especially the juniors at this time, I think we need to put aside all the outside noise and focus on our PM investments.

I know many of our subscribers follow other market other than the precious metals sector which is good. There are thousands of investment opportunities out there that can be a daunting task trying to figure out where to invest ones hard earned capital. I’m agnostic when it comes to making money in the markets. I don’t care which area to invest in as long as there is some volatility either going up or down. The 1990’s was a good time to invest in the tech stocks for example.

The precious metals complex fits the bill for me over the last 12 years as there is plenty of volatility going up and coming down especially with some of the precious metals stocks. Over the last 12 years there have been four separate occasions when my portfolios have done over 400% and that was mostly on the long side. I was lucky enough to catch the 2008 crash using SMN and DUG because there wasn’t any leveraged short gold miners etf’s like we have today. I was also lucky enough to catch the bulk of this bear market in the precious metals complex when we took our first short position in December of 2012 and exited in the first week of August of 2013. Now here we are sitting at another potential crosswords in the precious metals arena again.

One thing I’ve learned playing this sector and especially the juniors is that if you want to make the big bucks you have to get in early, right or wrong. I have taken several positions that didn’t stick and was stopped out even, or with a slight loss, but if you are early enough and right the doubling affect on the juniors can be astounding. Most of you already know this but let me just give you a theoretical example at what this means. If for instance you buy a junior for .10 cents you double your money when it gets to .20 and if it gets to $1.00 you have a 10 bagger or 10 times your original investment. On the other hand if you waited until the price got to .20 before you bought and it goes to $1.00 you only make half as much money. But the real story is when you get a junior, using the same example, the doubling affect really starts to kick in the higher the stock goes. The compounding affect can be tremendous if you buy the right stock. That’s one reason I like to buy a basket of juniors because you only need one or two to really hit pay dirt.

Lets look at the GDXJ junior gold miners index that is still in the beginning stages of a new uptrend. The early part of a new uptrend can be fragile but as long as nothing is broken you have to give it the benefit of a doubt. So far the new uptrend has been picture perfect. We have the red 5 point rectangle reversal pattern that reversed the downtrend. Note how each trendline, starting with the breakout from the red rectangle, to the first up slopping black dashed S&R rail to the neckline extension rail, all had a clean breakout and a clean backtest. You can see where Friday’s weakness found support, right on the neckline extension rail at 35.10. So far this is the price action working to take out overhead resistance. This type of price action is telling us the bulls are gaining in strength as each backtest is being bought. This is reality right now which is all we have to work with. Can something changes this reality, yes but until it does it is what it is.

This next chart for the GDXJ shows us some more positive price action. As you can see there was a nice clean breakout from the blue bullish falling wedge and there was a backtest 5 days later to the top blue rail. There is another piece of Chartology that is at work right now and that is how the price action is reversing symmetry back up as shown by the two small inverse H&S bottoms. What happened on the way down is now happening in reverse to the upside when you look at the previous small tops on the way down. It would be painful but there could be a backtest to the lower neckline at 33.50 before the price move higher. No guarantee though. Note the positive divergence on the RSI at the top of the chart, blue arrows.

The weekly chart below shows the whole price history for the GDXJ. First, notice how the brown shaded support and resistance zones worked as support and then when they were broken to the downside they reversed their role and acted as resistance. That is Chartology 101. The next thing I would like to show you on this weekly chart is the halfway gap that was formed last spring when prices really started to fall which created the gap. The blue arrows shows how I measured the halfway gap which had a price objective down to the 29.22 area almost exactly the very bottom. I think this is an important clue that that impulse leg down ran out of gas right where it should have. There is also a positive divergence on this weekly chart for the RSI.

Lets take a look at the long term monthly chart that shows the big H&S top that all the precious metals stock indexes had. It had a good breakout but the backtest was a little strong but that didn’t change the overall bearish picture as that’s when the price action really began to tumble. You can see the first low that was made in June of last year and the bounce that occurred. Then the December low fell below the Junes low which was very negative at the time. Many times these false break outs represents the final capitulation and the last bear has finally sold out creating a vacuum of only buyers so you get an important bottom. We still have one more week of trading in January but you can see this month produced the first black volume bar in a long time. One last point on this chart and this goes for the rest of the precious metals stock indexes. At this point in time the only pattern I can put to the price action between June and December of last year is an unbalanced double bottom.  With the price action rallying above the June and December lows that’s the only pattern that fits the bill. This potential double bottom may morph into something else later but we don’t have the luxury of hindsight. Many times after a stocks has a big decline or rally you will see a variation of a double top or bottom. Some are neat and clean while others are unbalanced. We won’t know the answer to that question until the double bottom hump is broken to the upside.

Lets now look at the JNUG that is the trading instrument we are using to trade the juniors for the most part. The first chart is the one I’ve shown you that has all our buy points labeled with the green rectangles. Just follow the price action up from the red arrow on the right side of the bottom pattern. You can see how each buy was made based on the breakout and then the backtest. As you can see we took our last position last Friday which would be the top green rectangle on the backtest to the S&R rail. You can also see the reverse symmetry taking place. How it went down is how it’s coming back up. The backtest was a little strong on Friday but nothing was broken. Also notice that if this backtest can hold right here on the S&R rail and JNUG can then rally up strongly through the top black dashed horizontal rail, that I’ve labeled as a possible neckline #2, then JNUG will be forming a much bigger inverse H&S bottom. This is only a possibility at this point but it’s something I’m watching very closely.

Lets look at one last chart that is a daily line chart for JUNG. This chart shows you a very clear picture of the reverse symmetry that is taking place since the little double bottom was put in back in December of last year which created the head portion of the inverse H&S bottom #1. Note how the lower right shoulder was formed on the backtest to the double bottom hump at 15.80. JNUG then rallied all the way up to the next high at 27.50 which acted as resistance late last week and we are now getting a move lower that could form a right shoulder. That’s the million dollar question right now. If JNUG can find a low somewhere in this general area and then rally backup through neckline #2 that would create a very large inverse H&S bottom which would equate to much higher prices. First things first though. In order for this setup to work JNUG needs to find a bottom very soon right in here. So far nothing is broken that would tell me to abort this potential bullish setup. So we have to go with the odds until something changes.

So this is where we stand in regards to our junior precious metals part of our portfolio. As you well know the markets can change in a heartbeat but we have to go with the odds that is suggesting to stay the course for now until something changes the scenario I’ve laid out for you. All the best…Rambus

PS: Here is a daily chart for DUST which is a 3 X short the gold miners etf that we used during the bear market last year. It looks like it may have just broken down out of a blue bearish rising wedge halfway pattern. If that is the case then this means the precious metals stocks will be in rally mode as DUST is declining. This looks like it’s going to be an interesting week to say the least.