Wednesday, November 30, 2011

Gold Fakeout Coming?

Gold is advancing higher on central bank liquidity-induced rally. 
But what central banks did was not QE at all. It was a way to improve existing liquidity flow within the system, but did not add extra liquidity into it. Bottom line - no new dollars were infused into the system. Hence gold rally is highly suspect here. I would like to share my view on possible fakeout that may occur at upper trendline of the wedge, which gold is in.

Following is the daily chart. You can quickly identify (highlighted) twin pattern within this strong bull. I am not calling for the top on gold, even though one was clearly put in this year. What I would like to do is catch a short-term reversal at upper trendline of the wedge, and travel the distance of the entire triangle down to lower trendline (just like at the end of June), which is also @ 150 dsma, a long-term support and a magnet for 3 yrs.
If I am wrong, I want to quickly stop myself out just above 1800. Gold is a wild beast...

Here is my play:

Short   - 1765 & 1775 & 1785 (blended 1775)
Target - 1675 & 1685 & 1695 (blended 1685)
Stop   -  1801


Rwrd -  90 (blended)
Risk   -  26 (blended)
R/R    -  3.4
Gold may fake breakout
(click on chart to enlarge)

Update on Dec 2 @ 4:25 pm
Partial (1/3) fill @ 1765.

Update on Dec 5 @ 9:25 am
Since I was only able to get 1/3 filled, I will use 33.2 oz mini to lock in profit on 1/3 of this position @ +$25. Moving stop on 2/3 to b/e.

Update on Dec 5 @ 2:25 pm
Further reducing position by another 1/3 @ +$40. Stop on remaining 1/3 goes to 1753.

Update on Dec 5 @ 11:55 pm
Moving stop down to 1737.

Update on Dec 6 @ 1:15 am
I would like to lock in the profit on the last 1/3 here. Out @ +$47.

Trade results: +25 +40 +47 on 1/3 original position size. Not a bad trade, unfortunately 1/3 size.

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