Commodity Futures Trading at Pivot Points - TheStreet

Commodity Futures Trading at Pivot Points

With help from the charts, I continue to watch stocks and commodities work through their patterns and cycles.
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By Chris Vermeulen, The Gold and Oil Guy

The commodity futures charts and gold and the precious metal stocks have been trading with increased volatility as they bounce between support and resistance levels on the daily and hourly charts.

This report focuses more on technical analysis and charts so I can show you what I feel these commodities are lining up to do.

I posted the chart of the

Market Vectors Gold Miners

(GDX) - Get Report

exchange-traded fund Monday afternoon to members as a short educational piece and to give warning to those where were currently in short-term long positions. This chart clearly shows that when the short-term trend is up and we get a black candle (pop and drop) the odds tell us that we should see lower prices over the next 24 to 48 hours for silver and gold.

This type of price action may look easy to trade, which it is, but only daytraders and better yet, futures traders, can make the most when these setups occur. It doesn't get any more exciting than trading after hours with commodity futures.

The nice thing about trading futures is that charts run around the clock 24 hours a day so you don't get price gaps that miss most of the short-term, low-risk plays. Investment vehicles on the

New York Stock Exchange

are limited to trading from 9:30 a.m. to 4 p.m. and that really does cut down on the amount of low-risk trade setups we get on a monthly basis.

Silver has been tougher to trade than gold recently.

Percentage moves are much larger with silver adding more potential risk to buyers and sellers. In addition, silver isn't trending strongly like its big sister gold and this adds another level of difficulty. Profits should be taken quickly during this type of price action.

Gold is my favorite and most profitable investment vehicle. I trade gold using the

SPDR Gold Shares

(GLD) - Get Report

ETF and futures.

Last week I wrote about this key resistance level and how I was waiting to trade until the Friday unemployment numbers were out and to see how the market reacted before putting money to work. Over the weekend the bullish sentiment caused gold to gap above that key resistance level but has sold back down after beginning the new week.

The chart shows that I am neutral/bearish for the next few days. Heavy selling and the small bear flag is a warning to me of lower prices. The natural tendency for gold is to drift higher through the night from 6 p.m. to 4 a.m. EST, so we could see higher prices in the short term but what happens in the following one to three days will set the tone for gold.

Oil has pulled back the past few days and is now trading near a support level.

I feel it is oversold and could bounce the second half of this week and I will keep my eye on it.

Natural gas is the most deadly commodity I know for the uneducated trader. The price swings are wild and

will

trigger stops no matter where you put them.

The whipsaw action always seems to form a megaphone pattern which means there are higher highs and lower lows during key pivot points forcing shorts to keep covering their positions and longs to keep getting stopped out as they try to protect their downside risk.

I rarely trade natural gas because of this. The stats I've heard are that almost everyone who actively trades natural gas will lose their money within three months. Yikes! So this is why I am so picky trading it.

The current price of natural gas is trading in the middle of its range. Entering a trade here is 50:50 and just not worth the risk.

There aren't too many exciting things in the market right now. We continue to watch stocks and commodities work through their patterns and cycles as we just jump in and out of the market when the timing is right. It's like a large game of Double-Dutch, you just have to time and monitor the patterns, speed and cycles so you lower the odds of getting hit.

Chris Vermeulen is Founder of the popular trading sites www.thegoldandoilguy.com and www.ActiveTradingPartners.com . There he shares his highly successful, low-risk trading method. Since 2001 Chris has been a leader in teaching others to skillfully trade in gold, silver, oil, and stocks in both bull and bear markets. Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.