Interesting Intraday Rounded Reversal in GLD Sept 30

Sep 30, 2009: 11:06 AM CST

I wanted to do a quick update post to show the “Rounded Reversal” pattern that formed recently on the intraday charts in GLD (Gold Tracking ETF).  Let’s see it on the 15-min frame.

Price began making new swing lows following a price lurch to the downside which created a new momentum low early on September 24th.  This hinted that – according to the Momentum Principle – a lower low in price was yet to come in the future.

It did later in the day, and then a new low formed the next morning on the 25th.  However, by this time, the price swings had narrowed and the 3/10 Momentum Oscillator showed a distinct positive momentum divergence on the $96.80 price lows – this hinted that odds of downside action were reduced.

Price still remained beneath the 20 period EMA until the morning of September 28th, when we initially breached above this level and above the 50 EMA.

Price then formed a “mirror image” foldback (price on the right side of the swing up resembled the left side of the swing) which completed the “Rounded Reversal” price pattern that we’re seeing currently.

Today’s session has brought on a new swing high (over the September 28th high) and more importantly, a new momentum high which hints that higher prices are likely yet to come.

If the pattern is truly a “Mirror Image Foldback,” then we would expect an upside move from here to ‘mirror’ the left side of the chart (but perhaps not as fast up as it was down – markets often fall faster than they rise) and formally complete the Rounded Reversal pattern.

Something to watch for sure.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

12 Comments

12 Responses to “Interesting Intraday Rounded Reversal in GLD Sept 30”

  1. Dominick Says:

    Hello Corey, One quick question. Do you use volume when trading live intraday or are you primarily using price action, the 310, and the other indicatiors you post on? I don't usually see a volume indicator on the intraday posts.
    Thanks.

  2. Corey Rosenbloom, CMT Says:

    Hey Dominick,

    Good question. Yes, I'll often look at volume, but I don't give it too terribly much significance unless I see a spike. Intraday, volume has a “smile” (high in the morning, low at lunch, high into close) so you can't use it as much in terms of “divergences” like you can on daily charts. I'm more interested in aberrations from the normal pattern (smile) and tend to find price action and the indicators I mention as more useful.

    Maybe it's just me, but I find direct trading signals from volume to be few and far between, and then when the signals are there, there's usually other indicators saying the same thing, so volume is just one piece of the puzzle.

  3. Corey Rosenbloom, CMT Says:

    I do like to show volume charts overlaid at the bottom in StockCharts, but in this case I chose not to because the volume bars obscured the point I was trying to make about the candles that formulated the Rounded Reversal.

  4. Ken Says:

    Speaking of volume Corey, it looks like the SPY is in a consolidation zone currently, and usually that means volume dies down as traders become complacent with the status quo…however it looks like price action is fast and furious in our current market conditions. What are your thoughts on whats going on?

    Thanks Corey, I always appreciate your analyses

  5. Corey Rosenbloom, CMT Says:

    Hey Ken,

    Good point!

    This low volume and large moves is just driving me crazy! I'm sure others feel the same way.

    As strange as it is, lower volume environments can result in larger swings due to lack of participation or lack of the other 'side' to stop the positive feedback (virtuous/vicious cycle) that comes from extended moves (new buyers leads to old shorts buying to cover leads to new buyers, etc).

    I have a few theories, but it mainly comes down to in an environment with lower volume, “bigger players” can move prices faster since there's fewer souls to take the other side of the trade.

    As to why there's lower volume, I'm at a loss. We should be seeing a pick-up as people return from the Summer.

  6. Dominick Says:

    Hello Corey, One quick question. Do you use volume when trading live intraday or are you primarily using price action, the 310, and the other indicatiors you post on? I don't usually see a volume indicator on the intraday posts.
    Thanks.

  7. Corey Rosenbloom, CMT Says:

    Hey Dominick,

    Good question. Yes, I'll often look at volume, but I don't give it too terribly much significance unless I see a spike. Intraday, volume has a “smile” (high in the morning, low at lunch, high into close) so you can't use it as much in terms of “divergences” like you can on daily charts. I'm more interested in aberrations from the normal pattern (smile) and tend to find price action and the indicators I mention as more useful.

    Maybe it's just me, but I find direct trading signals from volume to be few and far between, and then when the signals are there, there's usually other indicators saying the same thing, so volume is just one piece of the puzzle.

  8. Corey Rosenbloom, CMT Says:

    I do like to show volume charts overlaid at the bottom in StockCharts, but in this case I chose not to because the volume bars obscured the point I was trying to make about the candles that formulated the Rounded Reversal.

  9. Ken Says:

    Speaking of volume Corey, it looks like the SPY is in a consolidation zone currently, and usually that means volume dies down as traders become complacent with the status quo…however it looks like price action is fast and furious in our current market conditions. What are your thoughts on whats going on?

    Thanks Corey, I always appreciate your analyses

  10. Corey Rosenbloom, CMT Says:

    Hey Ken,

    Good point!

    This low volume and large moves is just driving me crazy! I'm sure others feel the same way.

    As strange as it is, lower volume environments can result in larger swings due to lack of participation or lack of the other 'side' to stop the positive feedback (virtuous/vicious cycle) that comes from extended moves (new buyers leads to old shorts buying to cover leads to new buyers, etc).

    I have a few theories, but it mainly comes down to in an environment with lower volume, “bigger players” can move prices faster since there's fewer souls to take the other side of the trade.

    As to why there's lower volume, I'm at a loss. We should be seeing a pick-up as people return from the Summer.

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