Gold and silver futures had breakout setups today, so today’s big moves shouldn’t have come as a surprise.I’ll write more about it later, but in essence, on a “breakout day’ we’re looking for the market to move through close in support or resistance, then have that move serve as a springboard to extend the initial thrust.That’s what we saw today in gold futures; let’s look at the chart.
Below is the daily chart for December Gold futures.As I trade breakouts, the first place I look for breakout points are the previous day’s high and low.In this case, that would have meant buying a break above yesterday’s high at 939.40.If you bought there, I would have looked at 945.20 as the first price objective-this was a 50% retracement of the selloff from Monday to Wednesday.(This resistance also could have served as a breakout point. The breach of a 50% level often extends a move).
After the 945.20 level, the next price targets were the trendline off the last two swing highs, at 959.40, then Monday’s high of 962.70.The trendline served to stop the rally (for now).I also put a chart of the Dollar Index below.The DX is holding at this week’s low; this hold may have cooled the gold bulls a bit.
I tend to treat breakout trades as day trades-I’ll generally be in and out on the same day.Sometimes this means you miss a followthrough move, but it’s been my experience that breakout moves often reverse themselves the following day, which takes away profits.The goal of swing trading is to make money on the short term swings; I’m willing to give up the occasional extra profit for the reduced risk of exiting earlier.
Daily gold futures chart
Daily Dollar Index chart
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