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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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  • Black Gold Poised To Shine 0 comments
    Nov 16, 2013 11:13 PM | about stocks: GLD, GDX

    By Poly

    This is an excerpt from this week's premium update from the The Financial Tap, which is dedicated to helping people learn to grow into successful investors by providing cycle research on multiple markets delivered twice weekly. For more up to date commentary subscribe. Now offering monthly & quarterly subscriptions with 30 day refund available if not 100% satisfied.

    The recent midweek report highlighted a technical pattern that frequently occurs during Gold's Daily Cycle declines - a step pattern of 3 sessions down followed by 3 days of sideways consolidation. The pattern is repeated as Gold falls into its DCL, with the final 3 day drop marked by broad capitulation and panic.

    Gold's recent move toward a DCL has generally followed this pattern, but I'm concerned that the last 3 day burst down was, by DCL standards, fairly mild. Technically, Tuesday's low qualifies as a DCL. The lower Bollinger Band was touched and the RSI was oversold. But since we're also looking for this Cycle to mark a much deeper Investor Cycle Low, we would expect broader capitulation and deeper technical damage.

    To satisfy my expectation of an ICL in the $1,210-$1220 area, Gold will need to endure yet another, more violent, step-down decline. A final drop is needed to wash out the remaining bullish sentiment and to push the weekly Investor Cycle down into a more recognizable Cycle Low. Because the Cycle is already 24 days in and price has churned sideways for 3 days (a bear flag), the final 3 day down move should begin almost immediately.

    (click to enlarge)The above these leaves room for doubt, however. In a modest departure from the primary expectation, I'm starting to reconsider the possibility that we might have another Daily Cycle ahead of us - the current Investor Cycle simply doesn't yet show the normal signs of an ICL. Gold's next move should provide clarity. If Gold immediately drops to retest the June lows in the $1,220 range, we can mark the drop as a both a DCL and an ICL, although the ICL drop will have been fairly mild.

    On the other hand, if Gold moves higher next week, Gold bugs should be fearful. With Gold at 25 days from the last DCL, a move higher through the 10dma ($1,294) and the declining trend-line will confirm that a new Daily Cycle is in play. On the surface, a new DCL is bullish, and many investors will interpret and trade it as such. But a new Daily Cycle will likely be the 5th in the current Investor Cycle, so should fail and lead to significant low. To avoid the downside that a 5th Daily Cycle would bring, the current 4th Daily Cycle needs to show a rapid $80 decline in Gold's price. Though nothing is certain, such an immediate drop will dramatically increases the odds of a DCL which also marks an ICL.

    Related Posts:

    Expect More Dollar Weakness

    Path Of Least Resistance Is Down For Gold

    Euro's New High Negates H&S Pattern

    Stocks: GLD, GDX
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