In this post I did my standard precious metals boilerplate in which I tell you how much I hate analyzing gold and silver because they (especially silver/SLV) are so blatantly manipulated.
I also said that I had seen some very strong signals, but on 1 or two timeframes, as if 3C had caught institutional activity that was short and sneaky at EXACTLY the right time. I went on about currency wars making Gold attractive theoretically and that I thought there was an edge in gold, I just didn't have enough information to define the trade and the most important part, "When". You can go back and check out the post and some follow ups in which yesterday I said I thought GLD needed some more time, maybe a day.
So here's the story and it's a good one even if you don't want to trade gold, there's something for everyone to put int heir tool box.
From a technical trader's view point, GLD is in a down trend, an intermediate downtrend with the primary trend being lateral. The red arrows are what Technical traders see and what they expect. Do you see the symmetrical triangle starting at the beginning of the year? A symmetrical triangle has no bullish or bearish bias on its own, it's one of 3 different consolidation/continuation triangles and the only one that has no bias in and of itself. The bias as to whether it's bearish or bullish depends completely on the preceding trend before it was formed; we can easily identify that trend as a downtrend and therefore the triangle is considered a bearish consolidation/continuation price pattern. Until last week the triangle fulfilled the consolidation part, as the triangle closes in and forms an apex (where the two trend lines meet and form the point of the triangle), technical traders expect the triangle to break down below support and start the next leg down which is roughly equivalent to the preceding leg down (in this case, about 14 points lower, measured from the apex).
Because a triangle is more bearish if it breaks before the apex is formed, few traders will short the price pattern, most will wait to chase price on a break below support or they'll stack up limit orders and stops right below support where the pros can see them.
I put the break down from the triangle in a yellow box, which implies this is a head fake move or a false move, which makes for a great buy at very low prices and very low risk.
From left to right, the first red arrow shows a reversal candle called and "Evening Star", the increased volume makes it higher probability a a downside reversal which it was. The next candle at the yellow arrow has the volume and some might say it's a bullish hammer, it's not though, the lower wick of the candle should be at least twice the size of the real body which is the shaded green area that marks the open to close and leaves out the daily high/low, so that is a false candle and worthless. The next white arrow is a true "Bullish Hammer" (hammers can only be bullish) and the heavy volume makes it high probability as a reversal and as support.
Then in the yellow box we have the break below the triangle which traders will sell and short, but that's not enough, because there's clear support from the hammer to the left, it's likely most of the orders are lined up below that hammer and because traders put their orders in with their brokers rather than keep them in their head, just about anyone with a brokerage account knows where all the orders are, Wall St. makes money running those orders and that's what happened today, the volume alone tells you.
We also closed today with a bullish hammer and huge volume, a bullish development on it own.
The small white box has a bearish resistance area called a tweezer top, it's two candles with the exact same high, volume is increased, it's a good signal for lower prices.
The next red arrow has heavy volume as first support is broken, that was the previous day's lows, a lower low.
Later in the day another support level was broken triggering more stops, this is important because few people know about it, that's the morning range. When a morning range develops, it forms support and resistance and which ever way the breakout from the range goes (up or down) is likely the direction the stock will close in.
At the yellow arrow some additional stops are hit from a break below major support from the daily hammer, even though it was already hit, thus volume isn't that high.
At the orange arrow the gap down hits stops logged in with the broker, this morning a 15 min bullish candle forms on heavy volume and that's new support.
The buy signal was perfect and the last sell signal didn't leave much on the table. The yellow area is out "Head Fake Options Trade worth about 215% in 4 days"
Imagine that, if you just understand the market a bit more than the next guy, you can make as much money in 4 days as they made in 4 years.
It's the last 2 hours of the day and this leading positive 5 min chart that really caught my attention.
I quickly checked the Gold futures themselves, a totally different market, totally different asset (real gold futures rather than an ETF) and a totally different version of 3C, here's the confirmation I found...
YG (Mini Gold Futures)
With today's ugly dump, this is the perfect example of Buffet's, "I buy when there's blood in the streets", except we actually have some confirmation and not just a saying.
