The battle for trend control of gold is fierce and the reversals continue to be very strong. On Thursday we again reached 1680 only to reverse and then trade to 1664 in New York and then reverse back to 1680. Once again on the Friday morning Asian market we are trading at 1669.
Regardless of which side wins this battle, this type of trading pattern is very dangerous one as reversals can take prices down hard and then just reverse the other way over and over. One of these reversals will be a big one and will eventually set the pace. The thing most troublesome is the choppy and overlapping pattern in gold price. While they do have a tendency to turn higher at important price turns, they also have a good track record of turning down and when they give way, the moves down can be hard.
If we look at the pattern, this is one of the biggest congestions I’ve seen in a while. And the amount of reversals from 20-30 dollar moves sometimes twice in a 24 hour period is concerning.
As we’ve stated, this kind of condition can resolve either way. Since the long position was taken, there have been three attempts to move above 1680-1685 and each time price has been catapulted back down under 1670. Thus the risk of getting stopped out grows with each rejection.
The window for the next two week cycle opened today. The ideal time is Feb 10th (plus or minus 72 hours). Since we’re in such a chop it is almost impossible to determine which direction price will eventually decide?
The Chinese New Year festivities begin next week and that is the biggest reason we’ve held out this long during this chop. The current position long at 1669 and stop at 1656 is a $500 dollar risk as I’m only using a 33 ounce contract and the only reason while I’m staying with it. Even there, the market can still come down and take me out only to reverse higher.
In summary, the pattern is very ugly. There’s a lot of bullish factors being mentioned but price is sure not acting the way it should. But we’ve seen reversals on both sides of the trade. The 1656.50 April gold stop Is under a $500 dollar risk and its no more than I’m willing to take at the moment. There is a good case to be made to just stand aside. At this point, I’m willing to let it go a little further. But let this update state that the position could very well be taken out and still reverse higher. At this point, if we look at the condition, this thing can go either way and it won’t surprise me if I get stopped out. Finally Gann Global’s database of 35 years of gold price shows that the first part of February usually produces choppy prices and the latter half often results in a sell off. That’s the average and any individual year can be different. So it is with trepidation that I hold on to the position but I’ll go one more night. Suffice to say if you have limited funds and you’re not risk averse, then you might consider standing aside. The bottom line is if you can’t afford the drawdown in getting stopped out, now is the time to exit.
NOTE: I’ve changed the silver entry. 30.48 is the Fibonacci 61% retrace and I can’t rule out a test of that area. I suspect that if this area is hit that I will already be stopped out in gold. In this position I’m only risking 30 cents per ounce. For those more bullish there’s support at 31.10-31.50.
===================================================GOLD CURRENT TRADE
(For Spot Use Two dollars Lower)
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Bgt 1 April Mini Gold at 1669.10 on 2/5/13
Use 1656.50 as a stop loss
TARGET
SELL 1 April Mini Gold at 1695
If we close above 1705 we’ll look at re-entering but wait for an update.
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SILVER CURRENT TRADE
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Buy 1 March mini Silver at 30.52 on (order still open)
Use 30.22 as stop
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YOU SHOULD NOT TAKE ANY MATERIAL posted on this BLOG AS RECOMMENDATIONS
TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED.
TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED.
Do your own due diligence.
No one knows tomorrow's price or circumstance.
I intend to portray my thoughts and ideas on the subject which may s be used as a tool for the reader.
I do not accept responsibility for being incorrect in my speculations on market trend.
I intend to portray my thoughts and ideas on the subject which may s be used as a tool for the reader.
I do not accept responsibility for being incorrect in my speculations on market trend.
King Regards
