Big Gap Down Sunday Night

With the phenomenal sell off last night, gold closed right at the lows of the session at 1477, off over 5% on the day.  We have to be very careful here, as volatility next week will be in a whole new league to what we have been used to in the past 18 months.  We are going to try and set out our strategy in advance for your benefit.

Looking at some long term Fib retracements, we can see there that the 61.8% retrace of the move from 1158 in July 2010 to the all time high in September 2011 comes in around 1452, as does the 38.2% retrace of the rally from 680 in October 2008 to the all time high.  This gives us a good initial target for this decline.

For those who managed to get the short trade at a reasonable price (above 1510), we will therefore look to close our position at 1452 and have set a buy order there to close out automatically.  We may get a big gap down on Sunday night when the market opens, so our order may even get filled below that level.  Either way, we have a good profit on the table and dont' want to see it go.

It will be extremely diffiult to pick a bottom on this initial decline - it could come in anywhere from 1477 down to 1300 - so we aren't going to try.

The trend is clearly down, even if it ends up only being a short term drop - going with the trend is the most sensible option.  Therefore, once we bank this trade, we will look to reopen the short into a recovery rally as there is bound to be more downside, even if we end up with a higher low on the second sell off.

The rewards next week could be great, though we must proceed with extreme caution, as the risks will also be much greater than normal.

 

YOU SHOULD NOT TAKE ANY MATERIAL posted on this BLOG AS RECOMMENDATIONS 
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. 

 King Regards