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Jeff Pierce
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I’m a swing trader of momentum stocks with a holding period of anywhere from a few hours to a few months. I run a number of screens to locate the strongest/weakest stocks out there, using technical analysis to determine my entries and exits. Trying to calculate the intrinsic value of stocks in... More
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  • Opportunity Knocks For Gold Investors 0 comments
    Nov 6, 2012 11:36 AM | about stocks: AGQ, GDX, GLD, SLV

    By @tradepoly

    Last weekend I warned members of The Financial Tap that gold was still just a 50-50% chance of having found a major Cycle Low. There was just a lot of evidence out of my Cycle Analyzer that was telling me to be very cautious, that the retracement to date was just not deep enough. So in reality what we have playing out here is essentially what I have been calling for since mid-October. Some 5 weeks ago when the decline began, I pointed out that a move back below $1,680 would be a normal retracement and it should become members expectations. (Acronyms used visit:https://thefinancialtap.com/about/glossary )

    Last week we witnessed a trend-line break as a result of the surge on Wednesday, normally a bullish event so late in a Cycle. But in this case it only served (as it often does at the tail-end of a Cycle) as a Bull Trap. The trend-line break sucked in the speculative longs and impatient investors who were afraid they were going to miss a big move higher. For the first time during this Cycle, the selling on Friday was of the capitulation kind. We often see panic selling late in a Cycle as a result of the weak speculative long positions getting crushed. During these events, it's the smart money that is accumulating and buying the weakness. This type of action is healthy in a bull market; it reduces the speculative and open interest and sets the foundation for a new powerful Investor Cycle to begin.

    We now have a breakdown below the important 38.2% Fibonacci retracement for this entire Cycle. The absence of this retracement before Friday was always a concerning factor for me, as almost all Cycle Lows experience at least a 38.2% decline. We're now also very deep in the Daily Cycle as we enter Day 28, just 3 days short of the longest ever 4th or 5th Daily Cycle. The deeper a Cycle runs, the greater the odds become of a Cycle Low occurring. Judging by the capitulation sell-off so deep in the Cycle, I strongly believe we are just one to three sessions away from Daily Cycle Low. This dear members, is opportunity "knocking" on your door!

    (click to enlarge)

    Only last week I had commented how the Investor Cycle (Weekly Chart) was just not oversold enough, not like past Cycles. With this week's drop, we have fallen far enough to match oversold levels found during most past C-Wave ICL's. From a timing perspective the coming DCL should be the last Daily Cycle simply because we're just far too deep in the timing band (Week 25) and the Weekly Cycle is now oversold itself. As the Daily Cycle is due to print a low within the next 1 to 5 days, we can say with a very high level of confidence that next week will also mark a Week 25 ICL.

    So in the coming week investors with be presented with an ICL buying opportunity that comes around only 2 to 3 times per year. By this point, everybody should have a fully loaded core portfolio and at least a 50% trading position exposed to Gold, Silver, and the Precious Metal miners.

    (click to enlarge)

    Silver is also showing all the signs of an imminent ICL. We have capitulation selling, a deep retracement, and generally oversold conditions. As is often the case with Silver (high volatility), it has already retraced a full 50% of the Investor Cycle and is sitting on its lower Bollinger Band and important 200dma. Just like the Gold Cycle, Silver is now poised to find an ICL and rocket higher. Silver always leads out of Cycle Lows and I expect this coming Cycle to be no different.

    (click to enlarge)

    It's interesting to track this current Gold Cycle via my Cycle Analyzer. In fact all along into this decline my Cycle Analyzer has been indicating that we were not statically ready to form a Cycle Low, at least not with decent probability. From the Analyzer chart below we see that the deeper a Cycle retraces and the longer it runs, the greater the probability that a Cycle Low is about to print.

    This most recent drop (Friday) now puts this Cycle at a point where a Low should form. When compared to all similar Cycles, the longest a Cycle has ever run is 30 days (3 more than this Cycle) and the deepest correction was just 0.5% more than the current Cycle. So both from a Cycle length and retracement standpoint, the evidence suggests that Gold is going to print a Cycle Low by next Wednesday, somewhere above the $1,650 area.

    (click to enlarge)

    With regards to the precious metal miners, we're finally seeing some real selling after what has to date been a controlled 6 week consolidation. We know we're close to a major low when the hottest sector of the Cycle begins to sell off like this. The miners are finally approaching the oversold level and are just a step away from a 38.2% retracement of the entire Cycle. Judging by the amazing strength shown by the miners during this decline, I would be surprised to see more downside below $49.09 on GDX. Certainly anything remotely near the 50% retracement at $47.19 is to be treated as a gift that should be taken.

    (click to enlarge)

    Trading Strategy - Gold/Silver

    Now you know why I didn't buy the Gold trend-line breakout on Wednesday, I just couldn't trust that we were in a new Cycle and needed to see much more confirmation before adding to existing positions. As the Weekly Swing Low (Gold at $1,731) was only $10 above Wednesday's closing price, the prudent move was to simply wait for the upside confirmation of a Weekly Swing Low.

    I entered into some more AGQ on Friday when I noticed that Silver was becoming oversold and already down 10% for the session. I love buying into extreme drops like that, but what aided the decision was the deep Cycle count while Silver was touching the 50% Fibonacci and its 200 day moving average levels. I may not have hit the very Cycle bottom, but I am confident that these levels will end up close to the eventual Lows. We must not lose sight of the fact that Silver typically will rally 20-30% during most C-Wave Investor Cycles, meaning AGQ should be up 40-60% by the top of the next Investor Cycle in 3 months' time. That should equate with Silver moving above $40 by sometime in February, this is not a time to be worrying about exact timing of the Cycle Lows.

    The remainder of the Trading Summary including future trading plans is available to members of The Financial Tap. We offer a full risk and obligation free trial to all prospective members. Try it for free for 15 days and if you don't like it then simply let us know, your obligation ends there.

    Members of the zentrader network can also use the coupon code (NYSE:ZEN) to receive an additional 15% an annual subscription should they decide to upgrade at the end of the trial.

    Stocks: AGQ, GDX, GLD, SLV
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