As you know, I have a longer term theory on GLD, but for now, after making nearly 215% in about 4 days on the last play which we thought was a head fake and turned in to a head fake, I'm just looking for the next set up and as with the head fake (which was planned days in advance), I have a theory and a plan on GLD that is so far, moving as expected.
As you might recall from yesterday, I'm looking for a candlestick pattern called falling 3 methods, which is at the bottom of this post. I think 3C will identify GLD before it breaks so I think we can get in early before the confirmation candle-more on that in a minute. What we want to see is a series of 3-5 candles (approx) that have relatively small bodies and that remain inside GLD's large down candle 3 days ago. It would be best if they rise, but with Euro weakness and dollar strength it may be hard. I'm not going to walk away from a potentially great set up because it doesn't look exactly like the textbook-they rarely do.
Intraday we see a little price strength, but volume is weak, this is what we want to see, what appears to be price strength, but weak underlying conditions.
The 2 min chart shows enough of a positive divergence that I think a Falling 3 Methods can play out, but it's not so much strength for me to be worried about a Harami reversal.
Today's intraday trade is inline so that's good.
This is roughly what the pattern looks like, the entry is usually on the last down candle making a new low, but as I said, I think 3C will be able to identify the potential reversal before that candle, giving us a better entry in price and with less risk.
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