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If you have been watching the Gold price over the past week or so then you’ve surely seen some dramatic movements, both up and down. When you look at the profit potential in these moves, the dollars add up very quickly. Longer term, things haven’t changed for me, I’m still bearish based on the 200% of the range I’ve covered numerous times in previous articles. Sometimes though a trader needs to be thinking a little more about the short term and where the next big opportunity might come from.
Late last week Gold fell heavily, $60/ounce in 3 trading sessions, that’s over US$6,000 per contract profit potential. Then after making a low on Thursday, the next 3 session saw a bounce back up of $50/ounce – last night (10 April 2013) saw Gold down $25/ounce. Talk about Gold being a mover and shaker right now. With all this volatility the question to be asked is where to next. Of course, to give yourself a chance of assessing the ‘where to next’ possibilities, you need to step back and take a look at the bigger picture.
Chart 1 is the daily bar chart of Gold (GC-SpotV) taking in the market action since the all-time high on 6 September 2011 ($1,923.7). This is easily enough market action to say you are starting to consider ‘the bigger picture’.
Chart 1 – Gold Daily Bar Chart – Strong Support at Low $1,500/ounce
click to enlarge
The low last Thursday (4 April 2013) came in at $1,539.4/ounce on the June contract. Looking at previous lows we have a nice price cluster:
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Price
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Date
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$1,535.0
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26 September 2011
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$1,523.9
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29 December 2011
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$1,526.7
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16 May 2012
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$1,539.4
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4 April 2013
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Looking closely at Chart 1 you will notice that I’ve added a few additional points to consider. Firstly the last significant high occurred on 5 October 2012. Adding approximately 180 degrees to that date takes us out to early April 2013. Sections of the Market shows a relatively clear 4 wave pattern in this bearish move down from the 5 October high, keeping in mind these are relatively short term sections. Together these elements give us; ‘Price’, ‘Time’ and ‘Position’ reasons to consider a potential bounce on Gold.
You will also notice green dots scattered over Chart 1. These represent a technique for marking successful Time by Degree dates based on the time of the month they occurred. Our green dots are generally referred to as our early in the month dates. The prominence of the green dots simply lets you know that these dates have been working successfully.
After the 3 trading days up from the 4 April low, then last night’s ‘down day’ (10 April) we are now presented with a ‘first higher swing bottom’ opportunity. The challenge with regards to the down bar here is that the range is very large and makes entry within 33% of the reference range impossible. Be interesting to see what the next day or so deliver.
There is always a chance that Gold could attempt to push lower, further testing the support level around the low $1,500/ounce level. Should this be the case then it will be well worth staying sharp with your Time by Degrees work, as there is always a large percentage chance this technique will come into play, it is that powerful. For now it is worth staying alert as there is an argument building for a bounce in the Gold price, even if long term that bounce proves to be nothing more than a dead cat bounce.
Above and beyond…
Noel Campbell
Professional Derivatives Trader
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