A Look Inside the Trend Day in Gold GLD

Mar 5, 2009: 9:51 PM CST

While the Stock Market gave us a Trend Day Down, Gold gave us a powerful trend day up.  I thought it would be more appealing to look at an upward-sloping trend day than a down one, plus it shows that the “ideal” intraday concepts I frequently discuss using the DIA, actually work for all markets and stocks.

GLD (Gold ETF) 5-min chart:

The day began with an upside gap of just under $1.00 (the larger the gap, the lower the odds of it filling intraday) and we had a push back to the downside that found support at the “Cradle” or confluence crossing of the 20 and 50 EMAs (that’s my favorite zone, by the way).

Price formed a doji at 10:00 and began rallying back upwards off an “Impulse Buy” trade set-up into new highs.  Volume rushed in around 11:30 as price surged to new intraday highs, confirming the odds were quite high for a Trend Day to develop.  Price formed a New Momentum High and you should have been looking to buy the pullback to the 20 EMA which occurred just before 1:00 as price formed a picture-perfect doji at support.

Price then formed a tight band or rising rectangle, hugging the 20 EMA as support the whole way.  Toward the end of the day, the buyers swooped in to drive prices even higher into the close, completing a picture-perfect Trend Day Example.

Notice the powerful volume surges, most all of which occurred on “up” bars which – to an extent – is quite bullish.

Where does that leave us on the Daily Chart?

I chose specifically to do a post on gold last night, entitled “A Mid-week Look at Gold” because I felt odds were quite high we’d at least get a reaction bounce off the rising 50 day EMA which is exactly what happened.

Volume is dis-confirming the recent down-swing, which indicates sellers are less-aggressive to sell.  A downside volume non-confirmation hints at underlying bullishness (meaning, sellers are backing-off).

That could change if price finds resistance at the 20 day EMA, but for now, odds seem to favor at least some sort of upward rally/retracement, particularly given today’s powerful action on such a weak day in the stock market.

Keep watching gold and the interplay with the Stock Market for additional clues and possible opportunities.

Join up with the Market Club for additional commentaries, trade ideas, education, scans, and signals.

Corey Rosenbloom
Afraid to Trade.com

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9 Comments

9 Responses to “A Look Inside the Trend Day in Gold GLD”

  1. Vasu Says:

    Hi cory :
    I read the article that you have suggested on Elliot wave theory basics.
    http://www.thedisciplinedinvestor.com/blog/2009/03/03/elliot-wave-where-are-we-in-the-wave-structure/.

    From what he illustrates :

    (1) After we complete the 4th and 5th wave we would have completed the ABC correction of the bigger 4rth wave . He says “it would seem that a fractal fourth (4) wave up followed by a fractal fifth (5) wave down would complete the 5-Wave major decline from the 2007 peak and suggest that a large-scale Three Wave Correction to the Upside – which could last months or longer – is expected next according to Elliott Wave Theory. ”

    From what I understand we should get an IMPULSE 5th wave after 4rth and that it should be a 5 wave UP and not an ABC pattern . Please correct me if I am wrong.

  2. Corey Rosenbloom Says:

    Vasu,

    It’s semantics. We’re due an ABC after a 5-wave advance. Think of Elliott in Reverse. There’s also a few interpretations of what’s next. Robert Prechter says it’s Wave 2 (ABC) up of the 5-wave decline in C (like I write). That’s the most bearish count.

    Others advocate we’re going into a major Wave 4 ABC up because this 5 is just part of a larger extended 3.

    And even if we began an impulse up off this level as the final 5th, we’d expect an ABC corrective phase to take place. Then an impulse could begin to the downside. We’ll have to wait and see how it plays out.

  3. Anonymous Says:

    Hello Sir,

    I need to ask two questions:-

    1) When we buy the pullback to the 20 EMA what should be the Target & Stop Loss. I used to take 50 EMA as a stop loss but confusion is with the Target Price.

    2) Your charts have 3 EMA’s. Green line is for 20 EMA, Blue Line for 50 EMA, What EMA the Red Line having?

    If possible pls also give views for Nifty.

    With the help of your blog, I’m learning the Intraday trading techniques. Pls continue this gud work.

    Thanx & Regards,

    Deepak

  4. Corey Rosenbloom Says:

    Deepak,

    Thank you for reading and for your comment.

    In regards to the intraday 20 period EMA on the 5-minute chart, one could conservatively place a tight stop half-way between the 20 and 50 EMA, but due to the volatility, it’s probably better to be a bit more aggressive and trail your stop just beneath the rising 50 EMA.

    The red line is actually a 200 period Simple Moving Average to try to assess the long-term health. EMAs on longer periods tend to distort the moving average too much by placing too much weight on recent prices.

    I missed last weekend’s update on the Nifty but will certainly analyze it this weekend.

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