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[AndyB]

Spot Gold

(any instrument, daily spot gold, gold futures, gold miners, NYSE:GLD ETF, NYSE:UGL Ultra Gold ETF)

Bull Pennant Breakout strategy:

Buy price: Volume break of the upper trendline in chart below (daily spot gold)
Estimate sell date: July-Sept 2009
Estimated price: $1,000 (Next resistance)
Drop price: Drop if the breakout fails and it breaks below the pennant

When/Why to buy gold:



Check the daily chart of spot gold. This recently tested $1000 and has been falling since. But on closer inspection it appears to be a massive bull pennant.

A bull pennant is characterised by a low volume sell-off or pull-back after a large rise. But the sell pressure just wasn't there to cause a reversal. As a result it whips between two converging lines. As they become more pinched the prospect of a breakout gets greater.

For bull pennants its likely the break will be up.

Also note the 1-2-3-4-5. This is an elliot wave count. Wave 3 is always massive and 4 is usually a bull pennant or some sort of low volume sideways pull-back. Which gives me reason to believe gold will soon test $1000 again.

Here's hoping I have gold shares! Lol

I should add, the way to trade pennants is as follows:

Breakout above upper trendline = long
Breakout below lower trendline = short
Breakout in either direction, then break back inside = stop and/or reverse

Personally when I see a pennant I don't bother waiting for a breakout, I go long from the lower trendline and if it breaks I'm already up X points, so its less risk

The timescale is long, this is a daily chart. A re-test of $1,000 may take until September. If at any time the breakout loses steam or if it breaks up then reverses back inside the pennant, drop it, the trading breakout strategy failed.

Educational Materials:

Good video on trading bull pennants here:
The Flag and Pennant Chart Patterns - InformedTrades

Example of a bull pennant here:

[artful_dodger]

Hi.

I'm an english investor living in France. I have been trading gold and silver for a few years. Your views are spot on in my opinion although I have been waiting to see if it breaks down or upwards...interesting volume though ;)

Edit: If I may add we are stuck in a very large bullish flag pattern that could last until June, then the price really gets motoring. For now I think we could be oscillating between 864 and 1000.

I also own stakes in CIA Minas Buenaventuras and Pan American Silver.

Cheerio

Artful.

[AndyB]

Hi mate, the chart at the bottom is not a chart of gold! Sorry I'll update - so thats not the volume on gold.

Yes long term I am very bullish on gold, to $2,000, however short term its possible it could drop to $650 due to deflation.

The chart tells me "Not yet"

You're right to point out the timescales on this chart is large. A re-test of $1000 looks like it could occur between now and Sept 2009.

BTW check my thread on SFEG (Santa Fe Gold). This is a speculative play but a mine that begins production imminently.

All the best to you!

[artful_dodger]

Thanks for the warm welcome.

I'm just sitting by the side of the pool really...no urges to jump in just yet :)

I'll check out Santa Fe, thanks! Some interesting bits of information on this site.

Au Revoir!

[Prentiss]

aburnett,
if you're big on gold, you may be interested in this spec play...
http://www.stockrants.com/forum/stoc...rnational.html

Let me know what you think.

[AndyB]

I'm a bit concerned that they are apparently pouring gold, yet the price hasn't moved (on MYNG that is)

[VicVan]

Concerned! I say thats other investors loss and our gain - I check this one as if they are pouring and they start whacking in cashflow and profits.... off topic though. Excellent charts again mate

[AndyB]

Would you say MYNG was a better bet than colorado gold fields? I bought some CGFIA the other day and I'd rather get in on something that is producing now - CGFIA seems to be years off production, which means my cash is tied up for all that time.

BTW Gold made a beeline for that upper trendline in the pennant I posted today. Every trader from here to uzbekistan will be watching that pattern. It is pretty certain it will break upwards, but what is not certain, is how far. Sometimes stocks/indices can go ballistic on a wedge-break, sometimes they can skid lamely and just run out of steam.

[AndyB]

Update on the gold chart



BTW if I was trading this I'd buy and set a stop to sell at $800-850. If I was leveraged trading this I'd buy and set a stop below the recent swing-low at $880 and would trail the stop up as it moved.

This is a medium term trade, gold may trend up and re-test its recent high of $1000. Gold is inverse to the USD, but also in some ways inverse to the markets. Note how interesting it is that gold is up and the markets are up.

[AndyB]

Here's an updated chart on spot gold. That bull pennant played out nicely and Gold has almost tested $1000 again.

Call me though daft but Gold is starting to look like a good risk:reward short

Any thoughts? This would tie into a deflationary model where USD would gain strength over the next few years and markets would sink into a deflationary spiral.

Gold moves inverse to USD, not the Dow as some think, but the Dow also moves inverse to USD. There's all sorts of strange factors to take into account nowadays aren't there