Monday, April 26, 2010

GOLD UPDATE

I wrote a post on April 10th regarding my interest in gold. I was waiting for the sector to prove to me that it is good shape to make a full exit out of a multi-month base. The criteria I was looking for was one final consolidation. This criteria has been met in the form of a developing symmetrical triangle that is using the 20-day MA for support. In addition, referencing the GLD, I am using $114 as the neckline for an inverse head-and-shoulders.

The important aspect of this consolidation is the evolution of it. From December 2009 till early February 2010, gold formed a descending triangle. From that point up until this month, gold formed a channel. The entire pattern exhibits both an inverse head-and-shoulders as well as a rounding base. This month is the most important as short-term consolidation was able to maintain the 20-day MA as immediate support. The only concern is that all four MA's do not have positive slopes, still leaving remnants of a channel's characteristics.

The moment the GLD breaks through $114, I believe it will be time to accumulate gold for a swing, and perhaps, a positional trade. for a target as close to the December 2009 highs as possible. The only risk is one overlooked pattern, which is the ascending channel. As long as the following criteria are met, I will deploy gold positions:

1) MA slopes are positive on the 20-, 50-, 100-, and 200-day MAs.
2) The GLD breaks above $114.
3) The 20-day is not violated as nearest support.

If this is executed, then gold will have successfully breached the channel and the inverse H-and-S neckline. Keep an eye on this sector and it's components as we approach May.







Lastly, I have finals soon so don't expect me to do my usual rapid-fire trading for the next 2 weeks. If I will be trading, then the time frame will be longer than just a few minutes.