That nice shiny precious metal is starting to get some attention lately. That is of course after two years of negative attention, as Gold’s price per ounce corrected from an all time high of $1923.70 down to $1179.40 on June 28th. If you were not watching the charts for the perfect buying opportunity on June 28th, is it too late to join the party? Let’s take a look at the charts below and see if there is another bus en route to take us on a ride to profits with Gold.
The top chart is a larger time frame weekly chart of Gold. After Gold’s peak in 2011 it then had a 50%+ correction to a low of $1179 on June 28th 2013. This area also coincided with a break below the April 2013 lows which was a Bear Trap area. As we have discussed before a Bear Trap area is where late buyers who bought much higher finally throw in the towel and panic out of their position. This creates an area where sellers finally outnumber buyers and buyers drive prices higher.
This is exactly what happened on June 28th and our entry signal was a Bullish Engulfing candle to buy Gold on GLD, displayed on the daily chart on the bottom in yellow. The next common sense place to exit the majority of our position was at the next potential trap, the last swing high put in on June 2013 of $1423.30. So now that we have achieved our first target and exited a portion of our position, is there still any potential for more upside?
If $1220 does indeed end up being the bottom and Gold is off to its 2011 highs of $1923.70 then there is still plenty of upside “reward” verses risk. The key is to still have 110% patience for high probability areas to enter new positions. For example, entering as Gold broke above its June $1420ish highs due to the media excitement is NOT being patient and if entered during this time at $1420 a buyer would have already had to sit through Gold selling off to $1359, or would have taken a stop loss.
Plotted on the daily chart in hot pink are support areas from previous pull backs in Gold’s trend higher. These are high probability areas to enter creating potential Bear Traps areas. As explained before, buyers that bought higher up panic out and sell their position on breaks below these areas. These are the areas we want to buy in. We do not want to step in blindly though because we do not know if the selling will increase in intensity. To minimize our risk we will be looking for bullish candlestick patterns to occur after price breaks lower through these support areas and look to jump on for the ride higher. Let’s keep a close eye on the charts for these areas and see if we can rack up some Gold profits!