After our well-timed entry last week in the sector, currency moves are continuing to support the price of gold, up another 0.7% early this morning.
GC Gold continuous futures contract – hit the first target (decending trendline) on Friday, and pushed through it. Frequently following such an obvious trendline break price will stall, sometimes even retreat a little. If this should happen I will lay out a number of scenarios and trading actions which can be utilized. Target two is approximately 431 – 432, which also happens to be roughly where the 50 day moving average will be lurking by that time.
TSX S&P Gold Sector index, which provided the reason to get long in the first place, plows through target 1 (20 ema) and recent swing high.
HUI Gold Bugs Index reaching up to where we would expect some resistance, the breakdown in price from early January.
My trading plan: Taking some profit on any weakness is probably not a bad idea, although my personal plan is to hold most or all of my position with a break-even on the off chance that we’ve nabbed an important and lasting bottom. After buying a test of bottom (TSX S&P Gold Index) I never take profit on the entire position on the first bounce, at most I’ll take profits on 1/3 to 1/2 of the trade.
My goal for a test of bottom is to get in on the ground floor of a trade that may last weeks, as opposed to our typical 2–4 days for most swing trades. I find that even if we are proven wrong about such things more often than not, the winners which follow a good entry more than make up for this.
Currencies
USDCAD breaks down after tailing to hold the break out and up from the rising wedge (marked in purple). The ultimate target for a rising wedge is the base, although as is clear from this chart (and the even larger rising wedge or channel) is price is stuck in a range and can be considered directionless in the big picture.
EUR against USD continues to act like it wants to stop the decline and is at least a currency we don’t want to be shorting.
GBP against USD coming in to a touchdown at target 2, the top of the recent range. IF price starts to trade above that range high and turn it into new support then price will have initiated a new up trend on the daily.
05.02.14 10:50 #