I’m bullish precious metals. Time for charts.

I figured I’m focus on some charts today, starting with the most bullish – commodities:

Cameco is the Uranium miner I’ve been holding, and it just broke out to new highs. I sold covered calls on it last week to lock in some gains, but I admit I’m beginning to think I shouldn’t have. Copper miners look to be breaking upward into a new channel as well. Some of my gold miners like WPM have copper exposure, but I also have some battery metal plays such as NOVRF – a copper/nickel streamer which finally put a bullish green candle over it’s 50DMA after months of consolidation.

Gold and Silver miners both had significant breakouts and backtests of bullish flag formations, and both just jumped over both their 50 day and 200 day moving averages. I used 1-year charts for these because they have been consolidating for that long. Hopefully they’re finally completing their cup-and-handle formations with 1-year handle formations on 10-year cups.

It looks like the Russell 2000 is forming a topping pattern, which could become a head & shoulders reversal. It had a bullish friday, jumping back above the 50 DMA, but these last few jumps didn’t seem to last long. It looks like it needs to test some significant support lower to regain upside momentum.

The S&P 500 also looks ready to fall a bit, but all that the current chart is calling for is another re-test of the 50 DMA – a drop of about 4%.

Although this is still my largest position, I can’t deny that this formation looks like a bear flag consolidation before another drop.

I still believe in the bullish case for TLT – that long dated treasuries are destined to fall a bit. TLT is highly shorted, the labor market is weak, and a lot of the money flooding into housing, the stock market, and commodity futures is debt based.

Steven Van Metre argues that this could be a bottoming formation, and that is possible. There is significant resistance at the 140 level here and a break above that could push values significantly higher.

I’m seriously thinking about whether or not to reduce my TLT exposure, but I will wait at least a couple of weeks before making any serious moves. The stock market looks like it’s ready for a pullback and that should be good for more risk-off trades like US treasuries and gold. I am very bullish precious metals right now, and I am expecting a significant market rotation into this sector over the next few months.

Here are my current allocations:

  • DOWNSIDE BETS (33.8%)
    • 27.7% TLT Calls
    • 4.2% IWM Puts
    • 1.9% EEM Puts
  • GOLD (20.3%)
    • 4.3% WPM & GOLD Calls (Large gold miners)
    • 8.1% EQX (Small gold miner)
    • 7.8% SAND Calls (Small gold streamer)
  • SILVER (20.7%)
    • 10.3% AG (Small silver miner)
    • 1.6% AG Calls
    • 5.3% SILV (Small silver miner/explorer)
    • 1.2% MTA (Small silver miner/explorer)
    • 0.7% RSNVF (Really small silver miner/explorer)
    • 1.7% SILVRF (Really small silver miner/explorer)
  • COMMODITIES (16.2%)
    • 10.3% CCJ shares (w/ covered calls)
    • 2.0% ALB (Lithium)
    • 1.4% NMGRF (Graphite)
    • 2.5% NOVRF (Nickel/Copper)
  • CANNABIS (6.1%)
    • 6.1% split between CRLBF, GTBIF & TSSRF (companies with significant US footprints)
  • CASH (2.9%)

Some of the people I follow on twitter are calling for a potentially significant correction in mid May. I plan to purchase some 1-month SPY puts this Friday if their charts seem to be working out right. They use various forms of elliot-wave analysis which seems to work pretty well but you have to know what you’re doing and I don’t – so I prefer to post my own simple charts with simple patterns that make sense to me.

Last week I did a few trades, selling off my FNV and WPM calls for decent gains and selling covered calls on my CCJ. I also bought some long dated calls in AG and increased my stake in NOVRF, but mainly just built my cash position a bit. I’ve heard calls for a pullback in Uranium, and if this happens I’ve been aiming for an entry stake in UUUU.

I am very cautious about Cryptocurrencies in general at the moment. I still think it’s nearing the end of an explosive parabolic move higher, where the highs will be reached followed by significant blow-off tops like you saw at the end of 2017. Don’t even try shorting this beast, as prices are more likely to surge higher than drop in coming months. I’m not touching crypto at all now though because I can’t trust myself to tell the difference between a very common heavy short-term price correction or a blowoff top and bear cycle, and I’m skeptical of the long-term bull story, so I’m liable to buy and sell at the wrong times in that space. Better for me to stick with precious metals where my bullish conviction is tested and strong.

About johnonstocks

I've been trading stocks since 2003, active on Motley Fool's discussion boards and using first Hidden Gems, then Global Gains. I no longer have the newsletters, but I keep up on the WSJ and read David Rosenberg everyday at gluskinsheff.com. Education: CFA level 2 candidate MBA-focus in Finance, Marshall, University of Southern California - expected Dec 2010. BS Mechanical Engineering, UC San Diego, June 2002
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