-- Published: Friday, 16 March 2018 | Print | Disqus
In my last Gold Report I provided you with two options, one to the upside and one to the downside for gold. The Outside breakout never came close to occurring but the downside did…sort of. Here’s what I wrote about the downside.
“Assuming prices first breakout to downside by getting under 1309.00, buying at XXXX Put at the market would make sense. You're wrong if futures prices reverse and get over 1364.4. To cut your risk down, you could consider selling a XXXX Put after you buy the XXXX Put.”
My last Gold Report was specifically about price momentum, not gold’s price as prices were in a trading range, not trending well and still aren’t.
I view momentum as being made up to two key components:
· Trend
· Slow Stochastics
Once these point to direction, I employ another indicator called PriceCounts. PriceCounts are NOT a trigger tool. Trend and Slow Stochastics make up the triggers. PriceCounts provide downside target zones, based on where the prior high and break lows, the initiating sequence were. There are up to 5-PriceCounts. The first has the highest likelihood of being hit, with the 2nd falling off sharply in terms of being hit with the same process taking place from the 3rd to the 4th and 5th. When markets go vertical, PriceCounts do a nice job of providing zones where prices are likely to stall out.
We have put together rules for PriceCounts that we can send by email to you if you don’t have them. If you are getting this by e-mail, I will attach them.
One rule that I use is determining if a downside PriceCount is active is getting two closes under the lower setup of the initial PriceCount. As you’ll see on the chart below, we’d had but one. We need one more and no, they need not be consecutive in their order.
Once we get the two closes, the Downside PriceCount is activated. Taking out the most recent high, which I’ve labeled with a redline is NOT a stop for the trade. Rather if violated it means the Downside PriceCount is no longer at work. Your stop orders as far as I am concerned come from other indicators, money management and the like.
Current Events
Today the U.K. accused Russia of poisoning two Russians on English soil. They are demanding an answer from Russia by tomorrow.
Last Thursday President Trump put into place tariffs on steel and aluminum. Exclusions were given to Mexico and Canada while NAFTA negotiations are ongoing. These exclusions could be removed without a “successful” outcome, with President Trump deciding what’s successful.
President Trump will soon meet the Kim Jung Un, North Korea’s leader. Prior to this historic meeting, North Korea will refrain from nuclear and missile testing. The US military will likely no do anything to provoke the North leading up to this meeting.
The next US Federal Open Market Committee takes place next week. There’s a near 90% probability that the Fed will hike interest rates a ¼ point.
Seasonal Charts
As you can see, the seasonal charts generally speaking, look bearish at this time of year. Yes we get some bounces, but the path of least resistance is down with the 30-Year pattern having the most bearish pattern. The Five-Year pattern, which takes into account the recovery from the 2008 financial meltdown does get a bounce from late March into April 10th but prices often peak out after that.
Daily PriceCount
When prices closed under 1309, the process of triggering the downside PriceCount started. As I wrote above, I like to see 2 closes under the bottom of the PriceCount formation, which means two closes under 1309 to activate the count. We have had one so a downside PriceCount has not been triggered. The next close under 1309, as long as 1364.4 is not taken out first, will trigger the downside event, put 1284.40 in play and trigger my option recommendations.
Daily Bar Chart
The Daily Chart of Gold has the Slow Stochastics in a neutral stance as the %K at 38.93 and %D at 36.69 are both going sideways, which is neutral to pointing higher as the K line is over the D line.
Prices are trading under the 18-Day Moving Average of Closes, 1330.2, which means the bias is down.
You can also see that the first test of the Lower Bollinger Band supported the market.
The Swingline Study, the line attaching each trading day’s tops and lows has a pattern of a lower low and higher high. That is not a trend. I show each as blue and red arrows.
There is no trend yet at work.
Conclusion
On the next close under 1309, assuming no new PriceCount pattern initiates, put on the option strategy of buying a June 1275 Put at 5.80 ob. If filled you can consider writing a June 1225 Put afterwards. Your risk is limited to the $5.80 but you can cut that down by selling the 1225 afterward. The trigger here is that a close under 1309 must first happen. I will address this in my regular subscriber updates IF this gets triggered.
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The information reflected herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. In an effort to combat misleading information Linn & Associates, LLC. has performed its due diligence to ensure that all material information is provided within this report, though specific information related to your investment, hedging or speculative situation may not be included. Opinions expressed are subject to change without notice. This company and its officers, directors, employees and affiliates may take positions for their own accounts in contracts referred to herein. Trading futures involves risk of loss. Past performance is not indicative of future results.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades may have not actually been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
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-- Published: Friday, 16 March 2018 | E-Mail | Print | Source: GoldSeek.com
