-- Posted Sunday, 15 April 2012 | | Disqus

By Scott Pluschau

I have been saying this for some time that gold's fairest price or current value in terms of auction market analysis is $1,650. I am aware of the "fundamentals" for precious metals such as "increasing currency supply", "paper assets", "debt", "default" etc, but the fundamentals are for "investing" NOT "trading". If I trade by listening to any other voice other than the market, I know I am finished in this business.

With that being said I have been fortunate to have stayed away from gold due to the structure of the daily time frame. I am sure there are other traders who can scalp, or slice and dice for ticks, reverse positions in an instant. But that is not my style and will never be. It is tempting to "Fade" gold while we are in this range, such as buy each time it hits $1,630 and target $1,650, or sell at $1,670 and target $1,650, but that is not my style. There are many ways to skin a cat, so if you have a system that works with gold right now, that is all that matters and I tip my cap to you.

What will it take for me to get involved trading gold to the long side? A bullish pattern on the daily chart that will increase the probabilities of a breakout for my trading system. I would like to see gold get back to a prior "High Volume Node" such as the one at $1,722, and then form a well defined "Balance Area" around $1,722, followed by a tightening consolidation pattern. That is when I will be focused on trading gold and holding onto a winning trade to the upside for the intermediate term perhaps even long term. This may never happen. This is not a prediction, just a scenario that I would like to see play out, based on what I am seeing today.

Let's look at the chart. Right now there is a well defined downward sloping channel on the daily chart, which is the first time I can see anything developing recently in the big picture rather than noise. Left hand side is 1 hour chart showing the magnetic pull at $1,650. This will not last forever. On the daily chart the Bulls want to see price breakout of the upper trendline to shake some of the near term bearishness off. Bears want to keep it inside and ride it lower to the lower return trendline which is around the round number $1,600. A critical support level in my opinion. This would have me looking to trade gold on any bearish pattern to the short side.

Expanded chart here.

Speaking of magnetic pulls, silver has the same situation with its high volume node around $31.65 on the 30 minute chart. One thing to note is the volume on the pullback was lower on friday from the previous day of the breakout. There is no chance of me holding to the long side any silver on a winning trade for the intermediate term until the right shoulder fails, or the H&S target is reached. A recent post on silver can be found here: http://scottpluschau.blogspot.com/2012/04/silver-bulls-are-hanging-tough.html

Expanded chart here.

Lastly let's look at copper. I was all hands on deck when it peeked above the trendline in the "Coiled Spring". The failed breakout sent the bulls running for cover. Copper quickly went across the pattern, and had a solid breakdown with confirming volume. This is not good bullish for the metals in the big picture near term. The coiled spring was a combustion chamber and I felt an explosive move was imminent. "Measured Rule" has NOT been fulfilled in copper yet but it's halfway there. A recent post in copper can be found here: http://scottpluschau.blogspot.com/2012/04/all-hands-on-deck-in-copper.html

Expanded chart here.

I will have my eyes on the COT report and the changes taking place in Open Interest later this weekend.

I do my best to tweet out my posts promptly on twitter/ScottPluschau
Consulting? ScottPluschau@gmail.com

-- Posted Sunday, 15 April 2012 | Digg This Article | Source: GoldSeek.com

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