Gold – Chart of the Day, April 3, 2013

 

Gold is hanging on the edge of the cliff

Before I mention anything about the Gold charts, let me first address the idiots among you . You are the people who will remind me in a month or so if the analysis herein is incorrect. In fact, you will remind me … and remind me … and remind me.

I am a chartist. I do not believe that charts are predictive. Charts are a tool, that’s it. I lose money on more than 55% of my trades. That means that my default assumption on each trade is that I will lose money. So, if I am wrong on this post, big deal.

Charts offer me the opportunity to identify several things about a candidate trade:

  1. Path of least resistance for a market
  2. A logical place for entering a trade
  3. The price level where I will throw in the towel if I am wrong (I normally limit the risk on any given trade to 1% of my trading capital)
  4. A possible price target or objective

More importantly — and you will not understand this point if you are a professional wannabe — certain price behavior and its resulting chart structure can provide insight into trade with extremely torqued reward to risk profiles. And this — in my opinion — is the real value of charting. So if I am wrong on a call — go whine to your psychologist! Maybe he (or she) will care.

One final point. While I give Silver bulls a hard time (they deserve it), I really do not care whether Silver and Gold go up or down. It does not matter to me. I just want to be on the right side of the move when it comes.

OK, onto the Gold charts. For a starter, please see the following post, The History of Gold Charts.

The monthly graph clearly shows the power of the bull market in Gold since 2002. This has been one grand advance.

4.2_GC57_monthly

I believe that the sideways action in Gold since the September 2011 high will be resolved by a massive advance or decline. I can read this 18-month congestion in one of two ways.

Option A is that the weekly Gold chart is forming a rectangle top pattern — and that a daily close below 1510 or weekly close below 1550 will trigger a substantial decline.

4.2_GC57_weekly Option A

Option B is that the weekly Gold chart is forming a continuation rectangle — and that a close above 1800 will trigger a substantial advance.

4.2_GC57_weekly Option B

I know that my “either or” scenarios drive you Silver bulls crazy. So, go whine to your psychologist!

The daily chart is where it gets interesting. Often times a move out of a massive pattern gets launched from a small pattern. The daily chart appears to be forming a 6-week symmetrical triangle. While not substantial, in and of itself, this triangle could be the fuse that lights the bigger pattern.

4.2_GC57

Stay tuned, boys and girls.

Disclaimer: I am short June Gold with a stop at 1602.1. I will pyramid this trade per the general thoughts presented herein.

$GLD, $GC_F

 

 

 

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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