Feb 5th, recap...the missing link...

Well,

I was correct in my assessment, just a little off in my timing. HGU did take a turn for a gap closure, came within pennies I believe but not by noon as I surmised. Most of the drop happened between 1200h and 1300h. I actually timed it so that I left for lunch and expected to be enjoying a snack while in front of my computer at home when the price finally did meet the 200sma and cross for the expected drop. As usual I was tied up so I did not get to see it except in retrospect. Shame too.

Here is the chart for HGU:

And here is the chart for HGD that I would have been trading on in order to profit from the drop in HGU:
The trade setups are pretty obvious. At about 1225h the price of both HGU and HGD hit and do a little jig at the 200sma...HGU led by a little bit, that is the edge as HGU trades with a higher volume so it sees the action first, not by much but just enough. That is a strategy that can be used to gain an edge on any stock...find a larger very similar stock to use as an indicator. Even better, use a smaller Canadian stock that has a NYSE counterpart that trades higher volume...AEM is a primary example of this.

Anyway, HGU leads by a hair but the trade is rally just to get in once the price crosses the 200sma, HGD did this then pulled back just a bit for a nice $9.15 entry...depending on the volume some of the osition might have been opened in $9.16 as well...close enough for an anticipated move of this magnitude.

I cannot say for sure where I might have gotten out but consider that I was targeting the closing of the gap, HGU that is $12.75. I really don't care what the price of HGD is as it just moves the opposite direction, this makes the trade easier to execute.

So, worst case:

Buy $9.16 Sell $9.32 Gain 16 cents ps Return 1.7% (HGU hits and stalls at R1 for a moment)
Buy $9.32 Sell $9.42 Gain 10 cents ps Return 1.1% (HGU has more room to go, re-enter)

$0.26 gain per share or 2.8% overall return on trades, Keep in mind these are now in the 400 share position size range so that is a $104 for the pair of trades.

What I do to make it cleaner is to watch HGU for the actual entry and also for the exit. The quotes on HGD tell most of the story as well but as I have always played the short sell I find it easier to see the price dropping on HGU to judge the timing.

Back to HGU for just a moment, if I were trading for the day there are four more long trades using strictly the pivot points for entry and exit points, even getting two of them would be another 14 or 15 cents per trade at 200 shares for another $30 or so.

Not a stellar day. The actual trades that I did broke even (well +$5) so I can count 2 losers and one winner in the mix already.

Jeff.