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Low-risk opportunity in Gold
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Low-risk opportunity in Gold

  #1 (permalink)
Trade with the flow
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Low-risk opportunity in Gold

Gold is hoovering around $1000. This is a major resistance level. I believe there is a low risk opportunity here. First, the COT report shows the commercials are heavily short and are intent at capping the rally. Large specs are at their maximum bullishiness (based on their historical levels) which means they have used up all their buying power. The result is it's unlikely the small specs (which includes the public) will be enough to push gold much higher. If this turns out to be the case, gold could collapse. Just like the tech bubble in 2000 and the real estate bubble. I believe we're seeing a bubble in gold.

However there is a reservation and that's the dollar. Commercials are supporting the dollar but haven't been able to get a breakout of the trading range. If the dollar breaks out (up) then gold will certainly go down. If dollar breaks down then gold could continue higher.

So it seems we're at a major turning point for gold. Here's my idea, let me know what you think:

Short gold at 1000 and keep the stop a few ATR above 1000. If gold breaks out on increased volume, then cover and go long with a stop below 1000. With price at a major resistance level the risk is minimum. The downside is either a temporary retractment (950 or more) and the upside is 1100. I think this presents a good R:R ratio.

I'm looking for comments. I'm a bit gun shy due to the everlasting stock market rally that defies all logic.

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  #2 (permalink)
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Interesting, thanks for the analysis.

But I would have to say -- don't overreach. I think you dabbled in CL and ZN for a little bit then later retreated from it saying you should have just focused on the ES. Don't let Gold be the next one on that list.

Aren't there enough opportunities within the ES, for which you've devoted most of your time and energy understanding?

Mike

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  #3 (permalink)
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Big Mike View Post
Interesting, thanks for the analysis.

But I would have to say -- don't overreach. I think you dabbled in CL and ZN for a little bit then later retreated from it saying you should have just focused on the ES. Don't let Gold be the next one on that list.

Aren't there enough opportunities within the ES, for which you've devoted most of your time and energy understanding?

Mike

You have good points but we're talking about two totally different things (swing trading & scalping).

For swing trading I monitor CL, GC, ES, DX, & Euro. I've been watching them for a while. When there is no low risk setup I stay out. And now I see some good setups. When the dollar breaks out of its range (up or down) it's low risk. And GC on a major resistance level is the same. For CL it's more violent so I'm waiting for it to fall below support.

The timeframe for all these is swing trading with 5-10 days timeframe unless I get a runner.

My comment about ZN & CL was related to scalping methods based on magic indicators. That was not good use of my time because it took time away from daytrading ES.

For swing trading that's not the case. I spend less than a few minutes a day looking at the setups, usually just a few seconds and I say "not yet". Well this week the "not yet" is turning into "maybe now" for gold.

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  #4 (permalink)
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I posted the original message from work. Now I'm home here is my swing trading chart. I have a long position and tomorrow is the reversal date and profit target was $1000. I'm betting gold is going to reverse tomorrow and head south, but that could change depending on what happens today especially in the dollar.

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cunparis View Post
I posted the original message from work. Now I'm home here is my swing trading chart. I have a long position and tomorrow is the reversal date and profit target was $1000. I'm betting gold is going to reverse tomorrow and head south, but that could change depending on what happens today especially in the dollar.


cunparis,

The Federal Reserve here in the USA tripled the dollars in circulation this spring.

When Germany did this in the 1930's, the result was hyper inflation.

I cannot risk not being protected against this scenario.

I recently converted my retirement plan to gold and silver double eagles.

Since purchased the gold price is up $85.00 oz.

This is a 5 to 10 year inverstment strategy on my part.

Please be careful,

RJay

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  #6 (permalink)
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RJay View Post
cunparis,

The Federal Reserve here in the USA tripled the dollars in circulation this spring.

When Germany did this in the 1930's, the result was hyper inflation.

I cannot risk not being protected against this scenario.

I recently converted my retirement plan to gold and silver double eagles.

Since purchased the gold price is up $85.00 oz.

This is a 5 to 10 year inverstment strategy on my part.

Please be careful,

RJay

My point was that it doesn't matter which way gold goes, down or up, it's coming out of a trading range and the move could be big. I think it's more likley to go down but I've learned my lesson and if a market doesn't do what I think is most probable then it's a sign for an even stronger move in the other direction.

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  #7 (permalink)
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Here's a chart of GLD. Notice the blue paint bar, this is high volume churn which shows professionals selling to the amateurs (see my Volume thread for more information on this volume pattern).

Then we get another one right after but it's not marked blue.

Today we have a high volume down day at a major high, this shows overhead supply.

Stochastics is crossing over.

Momentum is showing bearish divergence.

Gold drops with the dollar (usually they're opposite).

This is looking bearish to me.

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Go for the gold

Cunparis,

I thought this might be of interest to you. A look behind the Curtain.

Jeff

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  #9 (permalink)
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Jeff Castille View Post
Cunparis,

I thought this might be of interest to you. A look behind the Curtain.

Jeff

Thanks for the link. He doesn't really give a justification going long gold, just thinks it's the best trade this week. What kind of logic is that?

You can see that gold has moved up from 940 to 1000 without much of a pullback. I'd be more interested in the long side if there was some kind of follow through but from what I see the volume has dropped off and I am not sure there will be enough buyers to continue pushing it higher.

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China's government is urging the Chinese people to buy gold and silver.
China Urges Citizens to Buy Gold and Silver -- Seeking Alpha

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