I posted a few charts in early December to consider as contrarian plays because at the time, everyone was short the U.S. Dollar and long Gold.

Everywhere you turned, people were talking about how high Gold could go, inflation and how low the U.S. Dollar would go.

For contrarian traders, that early December post proved to be the turning point. Here is a link to that original post: U.S. Dollar Trade Update 12-02-2009 and a few follow up posts I’ve added since then: U.S. Dollar Trade Update 12-06-2009 and Gold Trade Update 12-07-2009.

The first chart below is of the U.S. Dollar Index. You can see the nice reversal from the multi month decline that has occurred since the early December post I alerted readers. Prices have moved strongly higher, through the 50 Day MA. The RSI has since become a bit over bought and prices appear to be in a normal pullback from the recent run. Also notice the 50 Day MA has now turned up for the first time in several months.

The next chart is of GLD. After a near vertical hyped ascent, Gold, and GLD, appear to have come back to earth so to speak. Prices here have also breached the 50 Day MA, but lower in this case.

Prices do not appear to be near term oversold yet, but with the recent decline, there is room to go either way in the short term. Any upward move in the near term may provide additional short entry levels for those who missed the potential first leg down here. This is of course, if you feel contrarian in that Gold has lower to go.

The next chart is of DZZ, which is a possible security to trade taking advantage of a decline in Gold.

This chart also has provided a nice monthly return for those who took advantage of the early December post. A 20-27% move higher has occurred since then in DZZ.

You can see prices have moved up to the 50 Day MA, which is also near the Gap that was left on the recent decline in November. What would be nice to see here is a normal type of pullback, and then a continuation move higher. If this appears to be happening, a large leg upwards could be underway bringing prices much higher from here.

The final chart below is of UUP for those who like a little less risk. It has made a respectable 5+% move higher since the early December post. Not too bad for less than a month’s return.

Same situation here following the others above- a normal pullback could be in order, potentially moving to the 50 Day MA as a support level, which is now turning upward.

That’s about it for now. Please note that a “pullback” as I have mentioned above is not necessary to occur at this point. There is always the possibility that prices will continue in their current trend, especially since they appear to be coming off a multi-month trend reversal.

In the previous post I was writing about potential contrarian trades if the U.S. Dollar was possibly making major or minor lows.

For Gold trades, I had a chart of GLD and showed how prices had broken out of two pattern formations within the last several months, and that if the U.S. Dollar was over-extended to the downside, and Gold was over extended to the upside, looking at these with contrarian views were compelling.

Here’s the updated chart of GLD. I’ve added a Fibonacci retracement grid overlaid on the chart. You can see that the initial move lower Thursday and Friday from last week, declined to the first 38.2% Fibonacci price level and bounced a bit higher before ending the week.

As I mentioned in the U.S. Dollar Trade Update 12-06-2009 yesterday, a bounce higher before moving any further lower is possible. Although as I’m writing this, Gold is trading lower after rising briefly in the overnight session.

I still feel that with all of the people short the U.S. Dollar and long Gold, and continued pressure against these positions make cause a panic, or rush, to continue to reverse these same positions.

For stock traders, I included a chart of DZZ in previous posts, which can be traded easily in the typical stock traders brokerage account. Here’s the updated chart which shows the nice 10% – 15% move higher in less than two days since I posted last Wednesday evening about using this as a possible contrarian play:

Those of you that know a little bit about me, know that I am primarily a very short term trader. Having a 10% – 15% gain in two trading days would probably make me take my gains and wait for another entry point, or possibly be willing to raise a stop loss to break even here with such quick gains.

At the very least, raising a stop loss to break even after a 10% – 15% gain in two days would be wise.

While I can’t and don’t, recommend any stocks or specific trades, I do try and post my trading ideas on this website even if I don’t have any position in the trade mentioned. I usually get too tied up with other things and writing. I don’t have any position in any of the stocks mentioned in this post, nor have I over the last few days.

The previous post was here: U.S. Dollar Trade Update 12-02-2009, and worked out to be perfectly timed.

The last post showed how prices have been reacting and moving lower as well as the addition of support levels which I added to the charts.

Following up now, the first chart below is a current chart of the U.S. Dollar Index over a 3 month period, displaying daily price candles. You can see the index made a large move higher just up through the 50 day moving average line.

This was the biggest one day range in several months. From here, with so many traders short the U.S. Dollar, any continued move higher will likely cause a panic of shorts covering their positions. This should cause additional big range days ahead if the rally continues.

After the big range day Friday though, a pullback should be expected of some sort. While it’s not necessary for the rally to continue, having a pullback would be normal and not at all change the fact that a longer term trend change may indeed have begun.

The next chart is of UUP, the U.S. Dollar Bull Fund I displayed on the last update. I displayed this for any stock traders out there who wanted to trade something in correlation with a move in the U.S. Dollar as a contrarian play, but in their stock trading account.

You can see here the nice move higher since my last update as well. About a 1-1/2% move in 2 days without any draw down so far. Prices here are also at the 50 Day Moving Average line, which may coincide with a brief pullback before attempting another move higher.

In case a bottom is not in, a potential area for a stop loss would be just below the previous low set a few days ago. If that low is breached, the potential odds for another leg down would increase. Make sure you use some type of stop loss with your trading plan.

The big winner since the last update was the contrarian play against Gold. I had a chart displaying a potential trade using DZZ which worked out great. It moved up between 10% and 15% in the same 2 short days. I’ll be adding an update for that on a separate post shortly.

Prior to the last update I had written about a potential bullish move the dollar, with trading possibilities such as in DZZ and UUP. This was short lived.

Afterward, I posted the 08-23-2009 update with new levels to watch for a potential move either way.

I’ll post the updated charts in the same order in this post, along with the previous support and resistance lines I had drawn on them to watch for potential breakouts.

The first chart below is of the U.S. Dollar Index itself. The previous support level I had drawn was near $77.50. I mentioned to watch this level for any significant breach for a move lower.

You can see that the $77.50 level was in fact breached and also became resistance later in early October. Also notice how the price action has been contained by the 50 Day Moving Average (or at least it appears that way on the chart. In reality, the moving average itself cannot contain prices as it is a calculation based on past prices). The 50 Day Moving Average line can be a psychological level though. Causing reversals or breakthroughs to occur more violently in many cases.

The current level is a major support level going back to late 2007/early 2008. If this level is breached, the next lower support level is around $71.50. A contrarian view would be to be on alert NOW, not waiting to see if lower prices are ahead.

The next chart shows GLD. In the previous chart from 08-23-2009 I had a Symmetrical Triangle drawn on the chart and mentioned to watch for a potential breakout, either to the upside, or downside out of this pattern. I’ve drawn the same Symmetrical Triangle on the current chart below to show what happened.

You’ll notice at point 1), that prices broke out up out of the Symmetrical Triangle for a good momentum trade entry signal, at the beginning of September, 2009. Also, in early October, 2009 at point 2), you can see that prices broke out up thru previous highs, another momentum trade entry signal.

Now. For any contrarian traders out there:

The next chart is of DZZ- a double short Gold ETN. I’m not advocating the use of ETN’s of ETF’s, or any of these trades for that matter, only providing some idea’s. Leveraged ETF’s and ETN’s have been in the news over the last several months, in a negative way, so be sure to do your own research and keep an eye on them if you decide to use any of them.

Previously I had drawn a similar Symmetrical triangle pattern on the chart and I have included the same pattern drawn on this chart to show what has happened here also.

You can see once again, only the inverse of the GLD chart, that prices broke out of the Symmetrical Triangle pattern. This time to the downside as this is an inverse fund. This breakout point, along with the breakout point below previous support (the dotted line) both allowed for potential tradeable short entries.

With prices at new lows, corresponding with new highs in Gold, any reversal would provide an excellent entry point. Possibly for a long term contrarian trade.

Moving on, the next chart is of UUP, a U.S. Dollar Bullish Fund.

You can see that I added the support level at $23.00 my previous chart. Prices gapped down through this level in early September and it has pretty much been a significant resistance level so far.

You can see that prices broke up through the 50 Day Moving Average briefly in early November, but have since reversed and are near new lows. The next lower major support level is $21.50-$21.75 so we are very close to this at the current price level.

Using previous support and resistance levels for potential area’s for stop loss positions, the Risk:Reward ratio for some contrarian trades here, look pretty compelling.