GOLD TRADE ALERT (2:45 pm EST)
Today Gold is breaking significantly below $1220 and is aborting the bullish "inverse head and shoulders" chart pattern that I mentioned in my last blog. In that blog (last Thursday) I also stated that: "What we want to see now is a rally into early March, but we need to be aware that there is a possibility of prices falling into that time frame instead." Unfortunately, it looks like the latter scenario is unfolding. Gold prices have broken the $1220 and $1210 supports but are so far holding above $1200. There is a possibility that this third support level could hold the correction into the first week of March, but there is also a good chance of prices falling lower. Silver is also falling steeply today and broke an important support level at $16.50 which caused a bearish sell signal to appear in its chart. This negated the bullish intermarket divergence signal that had been in place between gold and silver and gives support to the idea that both metals will now move lower into that first week of March. It seems like the best strategy now is to bail out of our gold long position (with a less than 2% loss) and wait for a bottom to buy in early March which could hold in the $1200 area, but more likely will be at a lower level, possibly around $1180. If prices go lower than $1180, they must stay above $1132 or we will have to abort our bullish strategy. The bottom line here is that a significant cycle low is due and most likely to happen in early March either at $1200 or a bit lower (but above $1132) and will likely be the starting point for a significant rally that could take prices back towards $1300 and possibly much higher. It is never easy to bail out of a trade with even a small loss, but at least we don't have to wait long for our chance to recoup the loss and make a good profit (early March). Fortunately, because of potential volatility (which we are seeing), we cautiously stayed out of silver (it dropped nearly 5% today). Both gold and silver, however, should be good buys if they make new lows in early March. Selling my long position in gold today.
Today Gold is breaking significantly below $1220 and is aborting the bullish "inverse head and shoulders" chart pattern that I mentioned in my last blog. In that blog (last Thursday) I also stated that: "What we want to see now is a rally into early March, but we need to be aware that there is a possibility of prices falling into that time frame instead." Unfortunately, it looks like the latter scenario is unfolding. Gold prices have broken the $1220 and $1210 supports but are so far holding above $1200. There is a possibility that this third support level could hold the correction into the first week of March, but there is also a good chance of prices falling lower. Silver is also falling steeply today and broke an important support level at $16.50 which caused a bearish sell signal to appear in its chart. This negated the bullish intermarket divergence signal that had been in place between gold and silver and gives support to the idea that both metals will now move lower into that first week of March. It seems like the best strategy now is to bail out of our gold long position (with a less than 2% loss) and wait for a bottom to buy in early March which could hold in the $1200 area, but more likely will be at a lower level, possibly around $1180. If prices go lower than $1180, they must stay above $1132 or we will have to abort our bullish strategy. The bottom line here is that a significant cycle low is due and most likely to happen in early March either at $1200 or a bit lower (but above $1132) and will likely be the starting point for a significant rally that could take prices back towards $1300 and possibly much higher. It is never easy to bail out of a trade with even a small loss, but at least we don't have to wait long for our chance to recoup the loss and make a good profit (early March). Fortunately, because of potential volatility (which we are seeing), we cautiously stayed out of silver (it dropped nearly 5% today). Both gold and silver, however, should be good buys if they make new lows in early March. Selling my long position in gold today.
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