On Dec. 16 I wrote a post ‘Will the Rally in gold Futures Continue?’ (Read it here).  From the low on Dec. 11 Feb gold futures rallied about $30 per ounce.  Normally the 16th would have been the Sell Short Day (Buy>Sell>Sell Short Day), but the narrow ranges on Monday and Tuesday gave Wednesday a breakout setup.  Wednesday saw a breakout rally, reaching the midpoint of the past two week’s range.

Yesterday was an “exit breakout buys” day; it also was the Sell Short Day that had been pushed out a day by the breakout setup.  For the Sell Short Day signal yesterday, there were two “reference” prices to consider for a short sale.  First, Wednesday’s high of 1142.50 was the classic Taylor Technique price.  The other price to consider was the Fibonacci level at 1140.20, being the midpoint of the recent range. Looking at the 60 minute chart below, you can see that it broke below both of these prices early in yesterday’s session.

This raises a good point.  Even if the setup for a short sale occurred before you were watching the market, the Sell Short Day bias was for lower prices.  This meant that as we were anticipating lower prices, we should look to be short or out during the session, as the trend was lower.  The midmorning drop below the old swing low at 110.20 accelerated the selloff.

daily - click to enlarge

daily – click to enlarge

Yesterday’s big down day meant we should anticipate one of two things today; either a sideways consolidation session if gold was still weak, or a Buy Day rally if yesterday created an ‘excess’ low. The Buy Day reference price was yesterday’s low of 1095.70.  I also thought the old low at 1110.20 was a significant level; a rally back over there would indicate that yesterday’s break below the 1110.20 level was an “excess low” marking the end of a selling auction.

Today’s session never saw the violation of yesterday’s low for a classic Buy Day trigger.  Instead, and overnight move saw a rally up to test the 1110.20 area.  The first move up there was rejected, and there was an early morning selloff as longs took profits.

60 minute chart - click to enlarge

60 minute chart – click to enlarge

Later into the morning we saw another rally; this time it did clear the old low.  I view this as a sign that gold’s picture is turning bullish. The midpoint of yesterday’s range is at 1119.30; clearing that would be another bullish signal.

This is a sample of the analysis from my Swing Trader’s Insight advisory service. For information on STI, and to sign up for a free two week trial, visit here.

The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

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