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Friday, May 19, 2017

Major breakout on the gold chart!

I used an exclamation point in the title, because buyers of gold tend to be very emotional, but it's best to keep your emotions in check. Emotion is your worst enemy, when it comes to trading/ investing.

Some say gold is a safe haven, some believe gold is bound to go higher because gold is a hedge against a weakening dollar (inflation), in a continuing recovery, but we don't trade on a believe on fundamentals, because what the end result leaves investors, and traders, believing in the fundamentals, rather than believing the chart. Fundamentalists will continue to insist that valuation, matters, even as markets continue to crash, and if you've never experienced this phenomenon, you have a lot to learn. There always comes a time, when valuation goes out the 27th story window.

I only care about the technicals, and what I see is a continuing rebound in gold which started in Nov, 2015. From there we saw gold rally from 1045.50 - to 1377.50, in only a few months. Once gold topped out, we watched gold tumble back to the 1130 level, about $50 beyond where I started calling for a bottom (@ $1180), and I remained bullish, eventually calling the bottom on gold precisely at $1130. Some would say, (particularly the loud mouthed, Monday morning quarterbacks, on CNBC's Fast Money), I was early, and that means I was "wrong", and If that's the case I wish to be wrong more often! I don't sell oversold shakeouts, any more than I buy overbought tech stocks!

A severely oversold shakeout is typical for Gold as it is for most commodities... they tend to shake out even the strongest hands, even shaking out the most seasoned traders, by taking out key support levels. This is how the game is played; Take out support (in bear marker), or resistance (in a bull market), and then take profits. We saw the same thing in oil at the end of 2015, where I was very bullish energy, ahead of the massive reversal...

All that I've explained above it best illustrated on the gold chart below. Shakeouts at the highs, and at the lows. If you don't know basic Elliott Wave Theory, you don't know what a powerful wave C is, so I suggest you study it this weekend. I have a free tutorial linked in the left side menu, or do a simple google search. To help explain where I think gold is in the wave count wave 2 is a pullback in a corrective pattern labeled a-b-c.

Gold: Key support looks like 1211 (my pink line). Short term resistance is the 50 day ma, just above where gold is trading. Key resistance is 1300.

Here's another view of the same timeline, and what a powerful wave 3 of C typically looks like.

Here's the same thing on the daily candlestick chart. Also shows the DMA level at 1248.75, and rising.

Short term watch for a breakout above the 50 day. Seeing gold up again this morning.
Take care, and have a great weekend, AA

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