-- Posted Sunday, 30 September 2012 | | Disqus
By Scott Pluschau
The daily timeframe is a picture of "Horizontal Development" in the Gold futures (see right hand side chart below zoomed in for six months). The highlighted blue "Rectangle" is a Mature Balance Area in Auction Market Theory. The balance area is a range of current value with the upper extreme being an "unfair high" and the lower extreme being an "unfair low" among market participants in a given timeframe. "Responsive" type traders fade this range. “Initiative” type traders are looking for the breakout into trend. The higher probability trade for either trade plan would be with the prior trend.
Is there a specific level that I would buy gold? My answer is to never commit to a price to enter a trade without knowing exactly what exit is going to be defined for the risk taken. The risk is always the location where my trade idea has been invalidated by the market and never based on a fixed dollar amount that I can afford to lose, some constant fixed number of ticks, or a percentage of the entry price.
However at this time I am only interested in a long trade setup due to the bullish structure of the daily chart. In the smaller degree timeframe like the 30 minute chart (see left hand side below), I am looking for an entry from a simple enough bullish reversal pattern at the lower extreme of the balance area of the daily chart, or a breakout to the upside from a consolidation pattern near the upper extreme of the daily chart. These trades would offer me the greatest multiple of reward to the risk taken.
I feel there is a good chance a position trade will be taken this week provided I have a favorable enough trade location from a perspective of probabilities measured to the reward and risk.
Open Interest continues to increase in gold. The Commercial Traders also continue to pile on their NET short position as of the latest Commitments of Traders Report. If gold enters another phase of vertical development to the upside out of this balance area, the bullion banks are asking for some mark to market losses in a big way.
Please view a larger chart here.
My most recent post on Gold can be found here:
http://scottpluschau.blogspot.com/2012/09/chart-of-day-gold.html
Comments are welcome ScottPluschau@gmail.com
http://scottpluschau.blogspot.com/
-- Posted Sunday, 30 September 2012 | Digg This Article
| Source: GoldSeek.com
