Yesterday I asked if gold futures had formed a bottom (read my post here). February gold futures have now rallied $30 an ounce from last week’s low; it’s a good time to look again, to see if this rally will continue.
Last night I labeled today a Sell Short day for gold futures. By the Taylor cycle Monday was the Buy day, yesterday was the Sell (liquidate longs) day, so today would be the Sell Short day.
On a Sell Short day, we use the previous day’s high as a “reference” price. We look for action against that high to indicate a short term top, a top that gives us an opportunity to sell short.
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This week’s range has been contained within the bar from last Friday. This meant that yesterday’s high of 1130.00 was at the midpoint of Friday’s range. To me, this mean that yesterday’s high. In addition to being the potential point for a short sale, it also was a likely pivot point – a move above there would likely see a follow through rally, a rejection from there would likely see a selloff.
From a slightly lower open last night, we’ve seen a strong rally, what Linda Raschke calls a “Power buy”. The rally took it to an intraday high of 1140.60. This was (roughly) at the midpoint of the past two week’s range (1140.20) and last Friday’s high of 1143.40.
Today’s rally doesn’t negate the Sell Short signal; it merely gives us an opportunity for a better play at a higher price as the market builds in more “excess”.
The Taylor method can be a slippery concept to grasp. A strict Taylor reading would have you looking for a short sale today. Thinking in broader Taylor “concepts” helps you use this method to find the market’s rhythm.
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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