Few weeks ago I wrote about possible top in gold and suggested a short trade in that market. It is time for an update. Original analysis, and the trade, were based on weekly chart, so nothing was expected to happen very fast. While the market has dropped from the high of 1226 to under 1075 at one point, this move still looks very small when comparing to the size of preceding up trend. Since then market bounced back to 1162 and started to sell again. This move up is not really too bad of development, as it created minor top, which can be used to place a stop. I’m choosing 1165, capping my risk for this transaction at 31 dollars per ounce.

Daily chart shows support at 100 SMA, which appears to be holding for now. Not too far back minor low of 1075 is located at roughly the same level. Should the price break under it, good selling opportunity will be created. Not for me though. My current position is as large as I find comfortable for the account size, so no additional entry is planned. Recent increased volatility in all financial markets is also reflected in gold. Daily ranges are not as big as they were few weeks back at around 1200, but days with ranges of 30+ dollars are not shocking. When I first started trading futures typical monthly range was less than that.

Looking at weekly chart, on which the trade was based, recent activity shows as not much more than a noise, minor consolidation before next directional move. With any luck it will be down and reach my objective of 1000-980. Time is the biggest issue here. Even if my analysis are correct, reasonable expectation for this trade would be 5-10 more candles (bars). Each one of them lasts a week, so this has to approached with long term mind set. Within this time span countermoves large enough to shake anybody’s confidence can easily develop. As long as this is well understood from the start I should be able to sit on it until objective is reached. Not very easy for somebody like me, who is used to trades lasting 1-5 days. Trade will be updated when needed.

Mike K.