May 17, 2011
- in Uncategorized by schooloftrade
Should I buy the lows or sell this retracement on Gold?
830am ET
– We begin our day with the dollar index
– We see a bullish channel with a price wedge
– We call this a ‘bull wedge’
– We know how to trade a bull wedge, but this is the DOLLAR, so we use this as a correlation tool
– Rising prices make up this bull wedge, so lets use rising prices as our guide.
– DX rises = Crude and Gold falls
– If we keep seeing new higher highs on the dollar today we will keep selling the gold and crude oil.
– I will be selling retracements as the price falls, and looking to sell reversals at resistance levels with this dollar making new highs.
– We look a little closer at the DX 06-11 34-range chart and we see lots of room ABOVE the dollar to move off the lows of the channel.
– This means we may have a big drop in store for the markets we trade this morning.
– And further looking at the 13 range on the dollar also shows a wedge pattern in minor trend lines.
– We may see this market go sideways in a wedge, or this market (dollar) may keep rising, we will wait and see.
900am est
– We had the dollar at the highs of the wedge and we saw the dollar break new highs above the wedge so we sold short
– We planned on selling retracements when the dollar made new highs, and that is EXACTLY what we did.
– We’ve had 4 trades today, 2 winners and 2 scratches
– The patterns on Gold have been great, but the price action has been sloppy
– Lets finish our morning routine and wait for better moves on the gold later this morning.
–
930am est
– We have 4 trades so far, following our plan of attack for 90 ticks of profit
– The dollar index did exactly what we needed, it broke new highs and we sold new lows on the gold for 91 ticks
– Now the dollar is coming DOWN off these new highs and into the wedge below us.
– This tells me two things:
o Look to BUY pullbacks with the dropping DX
o This may be the beginning of the END of any good movement (narrow price wedge on the DOLLAR is public enemy #1)
– Hopefully the DX can hold these highs and resume making new higher highs
– We will wait and see.
– If the dollar keeps dropping we look for buying pullbacks, buying at support, and if the dollar starts to rise, we go back to our initial plan of selling retracements with new lower lows.
945am est
– We’ve earned over 100 ticks today following our initial plan of attack, taking profit at the correct locations and managing our risk safely
– Now the markets appear to be transitioning from the big drop down (dollar rises) and now possibly looking to rise up off these new lows (as the dollar pushes down from the highs)
– Lets plan our attack on the markets we trade most so we are READY for the next move.
Gold Futures, open your 89range chart first and look for the most important levels of support and resistance.
– Sideways Price Wedge in yellow trend lines
– Bear Channel in grey trend lines, with the high of the channel at 1462.5
– Sideways Range from 1462.5 up to 1543.5, and we also have a few ranges inside this range, marked with a white box.
955am est
We have our gold futures under control for the best trades this morning.
Here’s what we see on the 34range on GC 06-11
· We are below the price wedge, so look to buy the lows and the re-entry into the wedge above PLOD
· We have a price channel that will trigger short entry below 1445.0
· Sideways ranges show us major support below us and major resistance above us.
· We are below the PLOD and PHOD, which makes this an OUTSIDE TRADING day which means we want to trade the breakouts.
· With price below the PLOD and the BMT and OPEN all above us right now, this would assume to have buyers pushing price back up.
· The OPEN and the BMT will act as price magnet, and since we dropped below the wedge, we can now look to buy these lows.
· We may also drop, and if that happens we have easy levels of support to use on the way down.
Let’s review our plan of attack on Gold:
If price rises:
– Im selling at resistance first, and then buying pullback with new higher highs
– I do not buy the highs, I wait to buy pullbacks
– Im buying above 1481.7 when we break the 34r trigger line which is major resistance at this time.
– Sell the PLOD 1488.5 as resistance, but if it becomes support (if we break through it) I will then buy a pullback as a sign of bullish things to come.
– I will be careful trying to buy above the PLOD making sure I wait long enough to get in above the lows of the wedge.
– Don’t get in too early, it will likely bounce you out!
– I will look to take profit at the BMT 1495.1 and avoid taking trades at the BMT.
– I will expect rising gold prices will come to an end at the BMT on our 34r chart around 1495.0
If price falls:
– Im buying support first, and then selling retracements with new lower lows
– I don’t sell the lows, I wait to sell retracements
– Im buying the LOD 1475.1 as support, and then look to sell a retracement with new lows below the LOD.
– As we drop lower im buying support at 71.1, 69.1, 65.5, 62.5 is MAJOR, 54.7, 47.0 is also major support.
– And as we make new lows below these levels im selling retracements.
1050am est
– We’ve tried to continue trading with confidence but the market personality is very challenging as we go into the 11am hour
– We know that lunch is right around the corner, but we may also see a late morning move.
1105am est
– We took a loss on the gold after seeing an almost perfect pattern and then the failure pattern didn’t work either!
– We were correct in our assessment of the changing personalities on Gold/Crude/Dollar this morning, and our results speak loud and clear.
– We now have gold at the lows of the bull channel
o Buy the lows of the channel
o Buy the support below the channel
o Buy the entry into the lows of the channel
