Short Cruide Oil 82.80 via HOD.TO @ 9.03, Stop 8.80

Update the day after: Stopped out at $8.81 for a loss of $64.90 = 0.7% of account.

I’m giving this short oil play another try. See the topping COT (CFTC: Commitments of Traders) lagging open interest data (bottom of Fig. 1). I waited for a breakdown in the hourly chart (Fig. 2) to make my entry into this short. The market has been coiling up for the entire month of October. Something big is about to happen sooner or later. Perhaps the U.S. midterm election tomorrow can finally move this market?

Stop is at 8.80. Risk is ($9.03 – $8.80) * 250 = $57.50 + $9.90 commission = $67.40 = 0.68% of account. Position size is still small with this lack of market volume.

Crude Oil

Crude Oil, hourly chart

Bought 300 HOD.TO @ 9.19, Stop 9.05

I shorted some crude oil to hedge my gold miner long right at 2 pm today. EURUSD looks to be trading in a range. And since FOMC and G20 are right around the corner, I am not expecting the market to do anything drastic (i.e. breakout). So I am shorting commodity (to long US dollar) as EUR/USD is at the top of its channel (Fig. 1). I picked Horizons BetaPro Oil Bear Plus ETF (HOD.TO) because it’s one of the most active reverse ETF on the TSX. I considered buying HFD.TO (for shorting financials) but that one has a fraction of the volume of HOD.TO.

The falling star candle right below the 82.50 resistance on the hourly chart of crude oil (Fig. 2) is also a factor in my timing.

Risk is ($9.19 – $9.05) * 300 = $42 + $9.90 commission = $51.90 = 0.5% of account.

Figures 1 and 2 were captured at the time of entry. The markets are still hanging on the ceiling approaching the close.

EUR/USD

Crude Oil

Bought 300 VEN.TO @ 8.95, Stop 8.80

Update Oct 20: I raised my stop to 9.10 this moring. It got stopped out 2 minutes before the close for a small profit.

Following the covering of my short side play this morning, I sneaked back in to the gold bug camp. In particular, I bought some of my recent favourite gold miner, Ventana Gold Corp. (VEN.TO), a few minutes before the close.

Gold held on to the 1330 support as I’ve discussed this morning (see gold chart in this morning’s post). I also watched the closing 30 minutes of the market and VEN.TO respected its 8.90 support level too. See Figure 1. There was a brief touch below 8.90 but it pushed back up quickly (not shown).

This is a play inline with the direction of the recent rally. Just riding the trend. Nothing fancy.

Hard stop is $8.80. Mental stop is $8.88. Maximum risk is ($8.95 – $8.80) * 300 = $45 + $9.90 commission = $54.90 = 0.5% of account. There’s a risk of another gap down open tomorrow. So my position is small in case the market runs away overnight.

Ventana Gold Corp. (VEN.TO)

I am sorry, My Precious: Bought 350 HGD.TO @ 10.26

I cannot believe that I am doing this. I am shorting my favourite asset, gold. Spot gold was trading at 1372 at the time of my short during lunch hour (see Fig. 1). I bought 350 shares of Horizons BetaPro Gold Bear Plus ETF (HGD.TO) to short gold. It is just more convenient to do that in my RRSP trading account at Questrade. I am well aware of the deteriorating value of a leveraged ETF (especially bearish ones). So I don’t intend to hold this for more than a few days.

The reason for this trade is simple.

Today Bernanke made it clear that QE2 is on (WSJ: Bernanke Makes Case for Further Fed Moves to Boost Economy). Coincidentally, note the orchestrated weakening upward momentum across precious metal (Fig. 1), currency (Fig. 2), and equities (Fig. 3). Perhaps this is a matter of buy the rumour and sell the news?

I am betting that this rocket is running out of fuel. If I am wrong, I have my stop set with a limited risk. If I am right, there’s a long way down from up here.

So this trade is merely a matter of exploiting good risk/reward.

Stop is set at HGD.TO $9.90. Anything below $10.20 will be a sign of caution. Maximum risk is ($10.26 – $9.90) * 350 = $126 + $9.90 commission = $135.90 = 1.4% of account.

Gold

EUR/USD

S&P 500

Sold 350 VEN.TO @ 10.50 (Profit +0.8%), Re-Bought 250 VEN.TO @ 10.67

My Ventana Gold Corp (VEN.TO) stop got filled yesterday afternoon as gold price took a dive (Figure 1) before the Bank of England minute today. However, the support at 10.50 look very promising as VEN.TO made a couple of successful long tail test of that level in the last 24 hours (Fig. 2). Seeing that the BoE has blatantly admitted to support the bandwagon on more quantitative easing (along with the FED), the bullishness in gold is written on the wall. As such, I am re-entering my VEN.TO position this morning with a smaller amount of shares.

New stop is a close of VEN.TO below 10.50. Volatility is expected to be high. So I am giving it some intraday leeway to move. A hard stop is set at 10.20. Risk is thus ($10.67 – $10.20) * 250 = $117.50 + $9.90 commission = $127.40 = 1.3% of account.

For the record, previous entries were at 9.74 and 10.85. My stop at 10.50 was too tight.

I am admittedly being quite aggressive here. Let’s wait and see if it pays off.

Gold

Ventana Gold Corp (VEN.TO)