Gold Is Setting Up For a Short

By: Chris Wilkinson of Longleaftrading.com

The overall fundamental theme for gold is still bearish. With the dollar rallying and commodities being dollar denominated, all else being equal, the price of commodities should decrease. The market looks to be pricing in low inflation to come and gold is used as an inflationary hedge. This is a bearish fundamental factor.

What we saw last week was very opportunistic upward movement that is helping set up the much larger downward trend that I foresee coming. The cash injections from the ECB and China should be short lived as the market will once again see these central banking efforts will not have a large impact on global inflationary numbers. Let’s look at the charts to plan our trade.

From the first chart above, you can see that the market is currently holding steady at the 61.8% retracement level of the measured downward move from the highs of 1255.9 down to 1130.30. From the second chart you can see the bullish Fibonacci move that has a price target right in confluence of our downward trend line. We want to get positioned for shorts after we have seen price action reject off of the downward trend line and take profit area and confirm the previous downward fib is still valid by seeing price action trade under the 50% retracement level you see in the first chart drawn as a yellow line. Once we see price action below that level at 1193.5 again it should be safe to assume the downward trend and trade to an objective of 1100 even. This is an extremely aggressive position considering the size of the move so my suggestion is to trade the intraday half back shorts once we get the validation of the downward trend.

The Fibonacci strategy I used here provides very specific entry and exit points. It is possible to apply on all markets to help find higher probability trades. If you would like to discuss any of the following you can reach me at 888-272-6926 or e-mail at [email protected] . I look forward to speaking with you and assisting you with your trading objectives.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data contained in this article was obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Information provided in this article is not to be deemed as an offer or solicitation with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this article will be the full responsibility of the person authorizing such transaction.

4 thoughts on “Gold Is Setting Up For a Short

  1. Many people said in early 2009 that the S&P 500 was setting up for a great short, and many actually went short in July or August of that year. Whenever an asset has recently been in a multi-year bear market, it is emotionally tempting to sell it short because you have been hearing gloomy comments for an extended period of time and so you psychologically perceive that asset as being inferior or weak. However, whenever there have been heavy outflows from any sector, huge insider buying, and bullish sentiment at multi-decade lows, almost all profitable plays will be on the unpopular long side. A much better strategy would be gradually accumulating into pullbacks--either gold or silver, or better yet the shares of its producers which are historically far more undervalued.

    1. As far as short medium or intermediate trend is concerned, your observation is quite fit and perfect, however, provided that such contrarily trade should be followed with very strict stop loss provisions, and capabilities to reverse trade in accordance with changing trend.

    1. Mr. Joseph, check again figures you have predicted, i think, you must also confirm that whether this statement is typed in your conscious mind condition or in any other situation? I found this post, even far far far ahead of "Day Dreaming"

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