Tuesday, April 15, 2014

Looks like gold is indeed headed lower

On Saturday I wrote that I thought the recent rally in gold would likely fade out this week and it seems that's exactly what is happening.  Gold fell nearly $30 and broke below $1300/oz.  It looks like this is probably just the beginning so be prepared for more this week.  Lets take a quick look at the GDXJ.

First things first, the consolidation between 36-38 we had going on just gave way to the downside, as I had expected would happen early this week.  We have now broken below just ever so slightly, but enough to cause chart damage.  This level below at 32.50, would mean another 10% down, despite it only looking like a small drop, but just because my analysis is correct SO FAR, does not mean buy blindly at 32.50.  Trading stocks is like Newton's law of motion.  You MUST assume that something going down will continue to go down until a force acts upon it (of some sort at least).  In this particular case, I would expect a large amount of value buying to come in and trigger some quick short covering that will likely result in a very large move higher off of support.  I EXPECT that support level to be around 32, but that remains to be seen.  Point is wait until it stops going down first, and then look for our typical indications of an impending move higher.  (Uptrend in MACD that begins to cross the zero line, and the 10 day MA crossing the 20.)  Currently price is staying below both the 10 and 20 day MAs.  The 10 day is below the 20 and they are both trending lower.  MACD is below the zero line trending lower, and just crossed below it's signal line.  There is nothing about this that says buy right now.  In fact every aspect of every indicator I watch says sell.  So if you have a long trading position  you may want to do so.  For now, the more nimble day traders can look to make some small change shorting this on a very short term intraday basis.  So now we wait...  Patience.  Let the market do the confirmation for you first, and you will cut your risk down drastically.  

-Jonathan M Mergott

No comments:

Post a Comment