Gold
Chart courtesy of Tradingview.com
Last week, the Gold short trade was stopped above $1200. Price immediately broke back above the head and shoulders neckline beyond $1200 and that was it. Stops are a good risk management instrument, they should be set at once and should be tight to protect your capital.
Today I prepared for you a totally new idea with a fresh look. I combined a classic trend model with the Elliott Wave technique and it is shown according to the long-term model posted at the start of this month.
Gold charted a good upside impulse wave 1 (of A) from the March low at $1142 up to the intermediate high at $1224. Then a correction wave 2 emerged and price retraced down to the 50% Fibonacci area at $1184. Usually, the 2nd wave corrects down to 61.8%-99% of the 1st wave, but this time we have had only half of it which means that the market accumulated enough bullish momentum to continue higher.
Wave 3 kicked off from the $1184 low and the two subwaves (i and ii) were already shaped and contained by the symmetrical triangle (highlighted in green). Price is squeezed within the triangle’s range at $1194-$1208.
You can benefit by buying Gold into dips to the $1194-$1196 level. We have 3 possible target options: 1) if wave iii becomes equal to wave i, then price could reach $1216, 2) if wave iii becomes 161.8% long of wave i, then price could touch $1232 and the last option is 3) if wave iii lasts 261.8% of wave i, we could see $1257 on the chart.
Put a tight stop $3 below the start of the wave at $1188 and then you will have the following sound risk/reward ratios for target options: 1) 1:3.7 ($1188 vs $1216), 2) 1:6 ($1188 vs $1232) and 3) 1:7.9 ($1188 vs $1257).
Once Gold manages to break above $1205 (local high) without correction to the $1194 area, then enter long. Stop is set the same, but risk proportions will be lower.
Silver
Chart courtesy of Tradingview.com
The short Silver trade was also stopped last week, right at the top of the move (high was $16.51 vs stop above $16.49) when the market tried and failed at the double top neckline after 3 attempts, such things happen but risk management is key and there is no need for regret.
Price charted steep falling highs and less steep falling bottoms and such a model is called the falling wedge reversal pattern, highlighted in black. The market is getting more and more compressed by the wedge sides and soon we should see the break higher, as it is a reversal pattern.
Wave C started on Monday and you have a chance to book some profit entering long positions. Buy at the current level ($16.07) or wait for the sub-subwave correction to the $15.95 area. Like in Gold, we have 3 target options: 1) if wave C becomes equal to wave A, then the price could go to $16.37, 2) if wave C becomes 161.8% long of wave A, then the price could reach $16.69 and the last one is 3) if wave C becomes 261.8% of wave A, we could get $17.27 on the chart. Another option is the pattern’s target located at $17.10, it is the height of the widest side of the wedge added to the break point. This gives power to the 3rd target.
Put stop ₵10 below the start of the wave at $15.74, risk/reward ratios are: 1) 1:1 ($15.74 vs $16.37), 2) 1:1.9 ($15.74 vs $16.69); 3) 1:3.6 ($15.74 vs $17.27) and Wedge version is 1:3.1 ($15.74 vs $17.10).
Intelligent trades!
Aibek Burabayev
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
Gold gives unreliable signals. Why waste time and money with it? Stocks are much more rewarding and there are always good setups to be found somewhere. Unlike for gold, triangles, which most of the time are breakout signals, do work for stocks. Good trading everyone!
Elliott wave stuff is garbage sorry, nothing beats simple chart patterns and volume. All one need do is look up "Prechter" and they would never look at elliott stuff with a straight face ever again. It's not even a credible form of technical analysis.
Dear Ricky,
Thank you for feedback.
Some people say charts at whole are garbage story. The truth is that we all can be wrong or right. 50/50
You are welcome to exchange your view in links or posts.
Best regards, Aibek
Oh so wrong!! Just over a week ago you suggested going short and got stopped out. Now your lines and triangles are telling you to go long and on the day you post this gold and silver drop stopping you out yet again but in the opposite direction. I appreciate your posts but I think you should put a little longer term perspective into things. It's currently locked in a channel and there's really no way of knowing which way it will go from here. Thus, for now, it's simply better to buy at the bottom of the channel and sell when it rallies. I'm inclined to believe that prices will be going lower eventually.
Dear Brian,
Thanks for sharing your opinion with me.
Yes short term trades are vulnerable as stops are tight and can be triggered often and the way is to find short to intermediate term trend.
We shouldn't be biased as only the market is true we can be wrong and more often when we want to. 🙂
Longer term ideas are done once a month and you are always welcome to read it.
And yes, long term trend is still bearish (http://www.ino.com/blog/2015/04/gold-monthly-update-hate-the-dollar/)
but we are in corrective countertrend move now.
Could you share the link with your view to discuss? I would appreciate it so much.
Best regards, Aibek
Hi Aibek, I don't have a link showing my view, I simply see different 'most likely' outcomes from current gold charts. You say "the long term trend is still bearish", yet you're recommending bullish bets that don't seem to have a solid case, in my opinion.
In the above charts, gold isn't so clear since it's a short time frame but it certainly doesn't point to the indicated targets. Buying at '2' and selling at 'i' was a decent short term trade, and now one would be simply waiting for a breakout or another chance to buy low (at the blue support line) and play it for a short run up or sell on a a stop if it breaks lower. The silver chart looks much more likely to stall at the top falling black line then return to the bottom falling black line. Nothing seems to suggest a breakout to your indicated targets.
Similarly, in your 'hate the dollar' link, I don't see the logic for expecting a breakout to the upside. The simple short term trade (in a long term bear trend) is to buy at the lower support line and sell at the top line. If your post of March 17 ( http://www.ino.com/blog/2015/03/gold-and-silver-update-the-dollar-trap/#.VTj88SFViko ) had suggested buying for a short run back up, then I would have been in total agreement. Instead, you're now suggesting (after 'missing' the chance to buy off the lower support line) to go long and expect a breakout to the upside, but gold is really just sitting in the middle of its falling channel with no indication of which way its likely to go next.
For anyone who is out of gold but is long term bullish, then getting back in with a little now is perfectly reasonable since it may not fall lower, but I recommend they expect and hope for it to go lower.
Brian, thank you very much for article long post and dedicating your time for me!
Longer term trends contain shorter term zigzags and they can be countertrends, therefore they can be solid.
In my post on March 17 it wasn't EW setup to offer wave start, different model.
And yes market on monthly charts is still sitting within $1100/$1300.
Best, Aibek
Dear friends,
I admit, my Gold stop was too tight compare to more level-based in Silver.
Agree with Kevin that trade is still in the game and stop should be set below $1184 (50% Fibo and local low) at $1180 area as upside potential is quite attractive.
Thanks for comments, Aibek
Aibek, you and your waves! I just don't know about those. To me, if ever there was voodoo in market analysis Elliott is it.
Looking at the COT for gold and silver I'm not seeing the great opportunity. I agree the price of these two in comparison to the dollar looks like a time to buy, and I am in on these two, but well, take a look at these custom COT charts:
http://goo.gl/x3xYBi
Dear old friend Anonymole!
Again and again I am grateful to you for real trading comments.
Market participants use dozens of techniques at their trades.
So I want to cover some of them for variety of views.
Thanks for charts, I will need some manual from you to be sure I understand all details.
Best, Aibek
Hey Aibek, the reason I included those COT reports (GC and SI are the two anyone would be interested in for this discussion), was that your last week's short trade actually seems to reflect the brief rise in the COT indicator. That the DXY stall seems remain floating in the air; will it push back to and above 100? Doubtful. But is sure is taking its time deciding to fall (putting downward pressure on gold and silver).
The COT reports are weekly CFTC data pulled and then combined with daily futures lifted from Quandl. The top yellow line is explained in the popup, but it's a simple commercial shorts minus commercial longs. As you can see by examining any of the charts, this one technique correlates very well with price action. There's nothing absolute in the numbers however, so relative changes are really all one can go on. (That is, it's not like an RSI indicator with a set range.)
The pivot is coming though don't you think? The dollar below 95 is gonna be the sign in my book.
Hi Anonymole,
Thanks very much for explanation seems I got it.
One thing regarding COT - is it lagging (1 week later CFTC report) or realtime?
Because it is crucial for my mind to have data realtime and back to back not historic vs realtime.
I don't trust oscillators too much, in trending markets they can't show peak or bottom as for instance in SP500 - uncharted territory is a problem for them. Intraday they are good.
You can email me
46****@gm***.com
or skype me aibek.b for expanded exchange of view.
Keep cool! Aibek
Here we are, DXY < 95 and precious metals taking off...
Gold has to get way past the second right shoulder of the H & S consolidation pattern its been locked in for the last few months. Right now its even with the right shoulder created in early April. I'm not convinced we are heading into a new gold bull market. Need to see it climb a LOT higher on increasing volume.
The dollar is very close to a 38.2% retracement of its rally from the bottom last year. Should find some serious support soon, then build a base for another giant rally.
Andy
Just waves my friend, all is clear there!
https://www.tradingview.com/chart/AAPL/gMlj5J64-BUY-AAPL-Catch-Last-impulse/
Here's an alternative take, Andy. So far, gold has hit and bounced off of the 50% fib retracement level from its March to April run. With a stop somewhere below 1185, some might see today as a low-risk entry point for a trade.
Kevin
Dear Kevin,
Much appreciate your comment!
Aibek
Really BAD timing! Gold and silver are getting crushed today. Gold is in a H&S consolidation pattern which is likely to push it down towards its eventual $600 to $800 price level later this year or next. Silver just dropped below an uptrend line set back in December.
I would not be buying gold or silver in an established bear market.
Andy
Dear Andy,
Long-term outlook as I posted at the start of the month (http://www.ino.com/blog/2015/04/gold-monthly-update-hate-the-dollar/) is bearish I agree, but at the moment we are in long-term correction it can take some months or even quarters to return to downtrend.
Short term trades are within days or weeks so different time frame my friend.
H&S was in place when I posted my last week's view but Neckline was broken up and right shoulder is broken into triangle.
It's an idea, you can keep with your view of staying neutral of course.
Best, Aibek
Looks to me it isn't going to take months or quarters to resume the downtrend. Silver broke down out of its trendline, doing the backtest prior to resuming its decline. It may yet do another backtest later, but the trend is down, as you pointed out yesterday.
Gold is down $26 from your bull call. Gold is waiting on the dollar to finish its consolidation before it starts the rise to 120 or so. When that happens gold will resume its bear market, taking it down to $600 - $800 an once, where most mines lose money. It will stay below $1000 for a few years unless we get a catastrophic failure of money.
Gold, like everything else, moves in cycles.
Andy