Gold the Game Changer?

Oct 20, 2008: 11:02 AM CST

Gold has been stunning traders both on the longside and short-side.  Adam Hewison released a great video to describe different time frame action, as well as reveal insight into possible future direction thanks to their “Trade Triangle” Technology.  Let’s compare charts and see what he means about gold.

First, let me display my quick interpretation of the daily chart:

Most noticeable is the series of lower lows and lower highs in gold prices (per ounce) which defines a stable downtrend.  Price is beneath all three key daily moving averages, and they are in the ‘most bearish orientation’ though just slightly so (20 beneath the 50 beneath the 200).

I wanted to make a note of something many people may miss in their analysis – regarding candle patterns.  We get caught up in defining what a candle is (hammer, doji, evening star) but sometimes forget the structure or ‘meaning’ behind them (why we expect them to ‘work’ because of how they reflect the struggle between buyer and seller).

I don’t know of a term for this other than “Long Upper Shadows” which had developed consistently about the $920 – $940 range, but just look at the numerous ‘price rejections’ of these levels considering how many times they have been tested in September/October.  Long upper shadows mean that price opened at a certain level, rallied up intraday, then gave back all or most of the gains of the day to close nearer to the open or beneath it.  Whatever you call it, it has bearish implications, because sellers are stepping up at those levels despite buyers continuously trying to push them there.

Should the buyers ‘give up’ or should value be determined at a lower level, price will fall, which is what is currently happening in a down-swing from these ‘long upper shadow’ levels.

Other than that, momentum broke a trendline to the downside and is not far from a potential new momentum low, and subsequently new price lows should we take out the $740 level.

That being said, let’s watch the decent sized (8-minute) video from Adam Hewison entitled “Gold – the Game Changer”.

Hewison takes us through the monthy, weekly, and daily gold charts, annotating them heavily, and emphasizes his take on the most likely direction with price targets.  He then describes a few methods to trade this move beyond buying/selling futures contracts, such as trading Barrick Gold (ABX).

Let me (Corey) make a comment about Barrick (ABX).  ABX actually made a lower low beneath the September low in Gold, which has even more bearish overtones for the commodity, as often stocks will lead their respective commodities.  Take a look at ABX and compare it to the price of gold.

Hewison writes (copied with permission):

“There’s no doubt about it, these are volatile times and that is reflected in the broad swings in all of the markets. One market that had a huge move Thursday (10/16) may have produced a game changer that you can make money on.

I’m referring to a major commodity that has not acted like it would normally act in an economic crisis. In this short video, you will see exactly how we have positioned ourselves and what we expect will be the course of this market in the short term.

The new video, which requires no additional download, also includes a well know stock that tracks the above market very well. You will see first hand where we expect this market to go to.

The video is available now. There is no charge and we believe it will help improve your trading in these volatile times.”


Copyright and Published by Corey Rosenbloom of Afraid to Trade.
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1 Comment

One Response to “Gold the Game Changer?”

  1. Richard Says:

    Corey, thanks for keeping current on gold. You seem to post the gold charts at just the right time. The chart suggests that gold could easily fall lower to $740.

    I am invested in gold and gold alone. In the linked article I provide lots of reasons for investing in gold, such as the death of capitalism. In fact, the chart of the Russell 2000, IWM, shows the death of capitalism quite well.

    The Russell 2000 is comprised of small US companies highly dependent on a functional financial, banking and credit system. Unfortunately the lending system had a cardiac arrest on September 11, 2008 when the banks found they could not sell stock to obtain capital; in consequence lending ceased across the board. While the Federal Reserve and world central banks have provided liquidity facilities in the extreme, and even provided full dollar funding to the markets, trust between lender and debtor has expired and cannot be and will not be enjoyed again. The stock and bond markets are going to fall desperately.

    Notice the fall off of value in the Russell 2000 beginning on September 11, 2008, that is 9-11-2008, and then a short sell covering rally and a crescendo fall, that is waterfall, lower; and now a rise in a pennant pattern. Prices are usually resolved down from such patterns.

    And gold could easily fall lower with a falling Euro, FXE; like lower to $740.

    If one has wealth, it is best to put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.