TRADING LESSON: NEVER SHORT A BABY BULL

One of my many mistakes early in my trading career was trying to trade counter trend after missing a powerful move. The momentum can be harder to break than many think.

75 thoughts on “TRADING LESSON: NEVER SHORT A BABY BULL”

  2. Gary Post author

    Are the miners anticipating a move down into a DCL ….. or is this a manufactured move so big money can pick up some more shares cheap?

    If gold is still flagging by Friday and not correcting one had better be ready to buy those cheap shares along with the smart money.

    2. Utopia

      Don’t look now Gary but Avi is suddenly singing the same tune as you. Too damned funny for words. After all the abuse he hurled now he turns right around and pulls a copycat.

      So he gets the credit of course!

        1. Utopia

          In this case I am one hundred percent on your side, Gary. And so are most of your fans as it turns out who can see right through that Turkey. I should just make a point of never mentioning his name again. Why give him any extra attention at all.

          Betcha he is a subscriber on the sly though. Riding coat-tails. Ha!!!

  3. pepe le pew

    Thanks for that lesson, Gary. I am trying to rebuild after decimating my account during the bear, during which I never shorted (d’oh!). Luckily I was 100% in during this run-up, and flipped to short miners during the last two days. But I was already nervous about being short, and your lesson has hit home. Sold my shorts in the last 20 minutes, and happy to have a few extra bucks to deploy for the next leg up, if and when it comes…

  4. Bud Fox

    I’ve had good luck because I don’t watch a 5 minute chart. Use the declining 50 ma and let it ride.

  5. Jay

    Likely this is still just a counter-trend rally within a deflationary secular bear in metals. Just sayin’

    2. Gary Post author

      Higher intermediate highs. That is a sign of a bull market. Bear markets almost never make higher highs.

  6. Jacob 2

    I’m in the baby bull camp. Gold will eventually be priced in thousands of dollars but it will not get there overnight. But If there is one thing that I’ve learned ; buying weakness works much better than buying strength and those who chase price usually get burned.

  7. pepe le pew

    Call me crazy, but I repurchased my shorts as GDX went green (almost green anyway). Hoping to scalp a little more profit as the pendulum swings again this aft….

  8. Utopia

    Good call Gary. I think your intuition is right on this one. The cup and handle pattern has been violated just for starters and is no longer valid so we need to look at other patterns. I have mentioned a number of times already my belief was that this is a bullish “bottom megaphone” formation in which case we should reach almost to 1250 for a confirmation. And that means we break higher not lower (it also means I will get completely screwed on the short I initiated last Friday unless I just hold in hopes we return to that price 🙂 ha ha! ). Next time I will trade on my better instincts,

  9. pepe le pew

    out of shorts again, this time with a loss of a few bucks. Just can’t short the baby bull without looking at the computer every five seconds! Again, learning the lesson.

  10. Bluebear87

    Gary and others:
    “Proof is in the pudding”http://stockcharts.com/freecharts/gallery.html?s=GDxj
    50dma AND 40wma bounce……. Coincidence? Nope just indicative of a bull market pullback consoilidation bounce.

  11. Paul

    Hmm still think Gary will be right with his short term pullback to the 1150 area before blasting higher….or have things changed ?

  12. Paul

    DXY dropping hard today..Gold should be hitting and blasting through 1200 with this but just showing stagnation instead.

      1. Gary Post author

        No, I think gold is just stretched a long ways above the 10 DMA and at a major resistance zone. If the dollar keeps crashing then gold is going to bust through this resistance and go crazy as shorts panic and longs have to chase.

        2. tulip

          Gary… if the fed hikes again March gold & gold stocks will
          go down …for how long who knows…. a correction w/in a new bull…….

          1. Gary Post author

            The Fed hiked and gold has rocket launched higher. If they are dumb enough to hike again who knows how high gold could go.

      2. Utopia

        The Yen is FREAKING ME OUT COMPLETELY!

        I don’t know if anyone else here follows it but this is a religious moment as it has turned far too bullish. Gold will not be hurt by this action. Just keep in mind there is a delay reaction. Holy Christmas guys, but on the daily chart its a rocket ride.

        WTF!!!!!!!!

  14. ChrisG

    Thanks Gary for the reminder. Me too was burned previously trying to earn both ways. Now if I take profit on a bull, I never short. Only patiently wait for pullback.

  17. Anthonyo

    We experienced a large bounce in gold. Cant seem to close above 1200. 3rd try now?

    WEEKLY: First confirmation of a bottom in gold will come: IF a close above $1,187.80 on a Friday.

    MONTHLY: Final confirmation will come with a close above $1,368.20 on a month-end basis.
    And baby we are a Loooong ways from that.

    Short of(pun intended) those 2 confirmations above, gold will go down most likely lower than its low in December.

    1. Mark

      Michael Oliver is spot on!
      He gives to sentiment and momentum more importance than any other indicator,he’s not the best if you trade but he is extremely good if you invest for the long term!

    1. JayT

      My $.02 is that the Chinese have been out for a few days and gold and stocks are still up.

      So when they come back next week, if could fire things up, not drive them down.

  21. CaliJay

    Gary,
    Back in January, when there was a big spike in oil, you mentioned that oil probably would consolidate in upper 20’s and it might definitely be the low. Oil has been churning up and down – what do you see?
    There are so many great stocks with pristine balance sheets in oil sector and thinking of taking a position.
    Thanks.

    1. Gary Post author

      Wait for the cycle to bottom. Oil should bottom along with stocks and the S&P may have a date with 1600 soon.

      1. Anthonyo

        You mean PPT will just lay down and play dead and let SPX go to 1600? This behavior is not supported by 6 years of PPT pushing up the market.

        Heck, they don’t even allow Dow 16,000 to be broken for long and quickly fill the pot holes with their quick draw crew and hot asphalt with roller on top. They defend Dow 16,000 like thei rlives depended on it for 2 months now.

  22. ChrisG

    In the end , I am the amateur who bought back some gold after selling it. Bought back a third at $5 higher. Looking to sell end of week or early next. There will be deep pullback. If not 1200, then max 1230 ish

  23. JRT

    Well you nailed that one Gary. Don’t short the baby bull indeed! Where do you see this taking a break or is it just to hard to tell with this kind of price action?

  28. ChrisG

    Sold my gold $1209. Even with this rally, gold has no problem dropping to $1130-$1150. Even though I am kicking my ass for trading my gold, I am comforted by my Yen trade. 250 pips in 2 days.

    I know gold will do a fib retracement. My only wish is that it doesn’t rally to 1300 before doing it!!!

  29. ChrisG etc

    If jpy continue to rally, gold ain’t dropping. My target for yen is 112.3 ish . So that is getting close. It should have a quick counter tend drop for few days. That could translate into gold weakness. Let’s see

  30. Anthonyo

    The analyst behind last year’s winning forecast: “Gold ‘Below $1000’ by April”

    Beating 30 other professional analysts in the London Bullion Market Association’s 2015 gold forecast (and coming a very close second in the silver forecast), Bernard Dahdah of French investment and bullion bank Natixis called last year’s annual average of $1160 per ounce down to the dollar.

    Now for 2016 Dahdah expects the gold price to drop through $1000 per ounce in the first 3 months of 2016, “gradually declining” to end this year at $950, with an annual average of $970.

    https://www.bullionvault.com/gold-news/gold-forecast-2016-010720163

  34. Anthonyo

    on GOLD:
    Pressing everything to the extreme will get everyone offside and separate the fools quickly from their money. There is NOTHING to trade on without a reversal matched with time. Selling the high with a stop above 1209 in a quick play, but you also have to be very nimble.

    We are not facing a major change in trend in all the gold market.
    This is the push to create that FALSE MOVE before everything goes completely nuts.
    So keep the power-dry.

    Time is required before taking action. In gold, we need to see February close above $1208 to take this rally seriously.
    But that in isolation would not unfold. Plus, the targets for the rally have been here in mid-February with high volatility building thereafter.

    With the Fed now considering NEGATIVE INTEREST RATES, this is in itself warning that the deflation is expanding.

    –Martin Armstrong Feb 10, 2016

    1. Gary Post author

      I think we can say with a pretty good degree of confidence that Armstrong is a complete fraud who is just trying to scam the world into buying his BS computer program.

  36. Bill J.

    The massive move in the early Asian trading hours could be due to the shorts covering out of HK-based traders…as simple as that.

  37. ChrisG

    If jpy continue to rally, gold ain’t dropping. My target for yen is 112.3 ish . So that is getting close. It should have a quick counter trend drop for few days. That could translate into gold weakness. Let’s see

  40. Utopia

    From Martin Armstrong today;

    ” Gold is being impacted by a pending banking crisis unraveling in Europe. This has nothing to do with US markets, the quantity of money, and certainly not inflation. The Sovereign Debt Crisis begins in Europe. It will eventually hit Japan, and then the USA but probably not until late 2017. It appears that the bull market for private assets in general on a global scale will unfold between 2017 and 2020.”

    And that is more or less the same point I was making in a long post I left here a few days back. I agree of course. It is not coincidence in my mind that gold is rising just as bank stocks take an ugly face plant into the pavement. There is real fear on the rise now. We had best be very cautious with those other parts of our portfolios that look to be coming unhinged as metals surge higher.

  47. Mark

    Will gold break the next resistance level of 1225?

    SO FAR 2016 HAS BEEN A DISASTER FOR THESE EQUITIES MARKETS!

  48. Mark

    DOWN FUTURES now down 315 points!

    BALTIC DRY INDEX down 290 points……………………..WORLD ON EDGE!

  49. Chris

    I sold gold at 1209. Bought back same price with more contract. Sold at 1218. I suspect this could be it. Because JPY may have found its top for this leg. Bought JPY 111.50. This could bounce maybe to 113,114? SO maybe, stocks also due for rebound. Lets see.

  51. Jacob 2

    Gary …. You’re the man. As I’m sure your well aware your only as popular as your last call so enjoy it while it lasts. Congrats.

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