Sunday 30 September 2012
Last Friday was the Quarterly, monthly, and weekly ending period, and the higher time frames continue to show positive progress in re-establishing the uptrend in gold and silver. The monthly and weekly charts dictate the context of how the market[s] is unfolding, and the daily and intra day time frames are used to initiate trades.
Month-ending September 2012 is the second highest ever monthly close for gold, certainly a statement that gold is strong. Its price is just below the long-standing 1800 resistance area. Subject to normal
corrections within any trend, we should see upward movement, overall. After 1800, the next obvious resistance is just above 1900, and you can see how price has been contained by September 2011's wide
range down bar.
Despite focusing on potential resistance, always uppermost in one's mind when engaged from the long side, there is no evidence of supply entering the market as price moves to the first expected strong area
where price may stall...1,800. The November 2011 and February 2012 swing highs are likely to provide a stopping point at the broken line, which indicates future resistance.
That area also shows how the market experienced EDM, last February, evidenced by a wide range bar down and a low end close...sellers were in total control, and they can be expected to defend that level. To get an idea of the character of the market, it is necessary to compare downswings and upswings to determine which is stronger.
From the February 2012 swing high, price dropped to the May low and then drifted sideways for another three months, transitioning. The gain in price from August and September was much faster than the final
swing decline, a show of strength for demand over supply.
What we see is a clustering of closes just under expected resistance without price backing away and moving lower. That price can linger at/near resistance tells us that buyers may be absorbing the effort
of sellers, and that conclusions gains currency by observing that closing location on each of the last three weeks was at the upper end. This tells us that buyers are in control.
A clustering of closes can be a resting spell, or it can be a turning point to reverse price direction. The overall technicals do not show any cracks in the recent newly-established uptrend, so subject to normal corrections within an uptrend, price should hold well and continue higher.
We discussed the significance of a trading range and how it provides a degree of "stored energy" for propelling price higher. [See Silver And Gold - Developing Trend Up, click on http://bit.ly/PHFwYU see 3rd
and 4th charts, along with explanatory paragraphs for each once.] Because the higher time frames are not showing any supply entering, we should be on the lookout for buying opportunities. After a small
trading range for the latter part of September, there is a sharp price break on the 26th, third bar from the right, and it holds the 50% retracement area of the last rally from the very wide range rally bar a few weeks earlier.
If this is an opportunity, we need to look at the intra day chart for confirmation and supportive market activity. For that, we looked at a 20 minute chart.
This is the intra day chart for gold on 26 September, when price was dropping under the trading range seen on the daily chart. We always want to see unusual price/volume behavior. At the initial low, just
after 7 a.m., there is a wide range bar down on a sharp volume increase. Whenever there is a large volume increase, particularly near highs and lows, it is a transfer of risk from weak to strong hands. The
close is mid-range the bar, and the market is telling s that buyers were the most active in meeting and overcoming the effort of the sellers. That is an alert bar to watch for an opportunity to establish a long
Several bars later, there is a new low, but not much lower which says that sellers have pretty much spent themselves and confirmation that downside pressure has abated. What we need to see next is some kind
of strength, and we see that around 12:30 when price closes strongly on a bar that is above the previous downside volume, negating all that selling effort. The time to buy is NOW, and that was the 1753 price,
shown on the chart.
The initial stop was 1733, that day, but the positive activity since allowed to raise the sell stop to 1762, making the position a "guaranteed" win. [There are no guarantees if there is a fast market, but baring that, normal price activity should result in a gain.]. There are a few issues on the daily chart that indicate a possible correction, and that is why the stop was raised.
Of course, the long position from 1659, is still in play, [See Silver And Gold - Context Matters, click onhttp://bit.ly/QZqpLC, last chart...3rd chart for silver buy]. These recommendations remain open and do not
reflect profits for positions closed out in September.
Gold is still relatively stronger than silver, according to the higher time frame charts, and you can see that in a comparison of the two respective monthly charts. February 2012 was the highest monthly volume in about a year, and price closed at mid-range the bar on a swing high rally, indicating that sellers overcame the effort of buyers and proceeded to push price lower in the ensuing months.
The February high was 37.48, and the 38 area is a halfway retracement level, when combined will likely produce resistance to any rally.
There is a similar correction in silver, three bars from the end, after a trading range, and it bears a closer inspection intra day to see if there is a buy opportunity. We already discussed the "stored energy" that
a trading range provides, see the link above from the gold comments on the same topic.
Silver produced a slight variation than did gold, intra day, and silver was more positive. The upper range close on the highest volume indicated buyers stepped in and overwhelmed the efforts of the sellers to get price to close as well as it did. Unlike gold, which made a brief lower low, silver held its intra day low like a rock, and price advanced strongly with a wide range, upper bar close at the same time as gold, around 12:30. That was confirmation to buy NOW, at the 34 area.
The initial protective sell stop, [always, always have a sell stop for every position] was 33.00, and that was raised to 34.10 to minimize risk exposure. While the monthly and weekly charts do not show any
supply, there are a few potential issues on the daily chart that could allow for a correction.
Long gold from 1659 and 1753, and long silver from 30.60 and 33.99. Keep buying the physical!!!