Wait For Gold To Retrace, Then....

It's the incredible reserve, er, the amazing flight to safety, uh, it's the anti-inflation, hum, what the heck is gold as far as a trader is concerned? Stop listening to Coast to Coast and Gold Bugs who also have nuclear bunkers reserved for them in Baker, California (who'd have known all these years of driving to Vegas from LA there were nuclear bunkers in the ground there that people actually paid for).

Gold is just another instrument that can be traded, and it should be analyzed like everything else. Right now, Gold's major long term uptrend has been broken, at least for now (see earlier post below). It's been in a choppy sideways phase and recently sold off.

Gold, represented below through the ETF, GLD, dove down and has started retracing. I am keeping an eye on this retracement to see if I can jump in on the short side when the time is right. I like to use Fibonacci (Fibs) retracement levels to do this. To be clear, this is not an IBD style trade. I love IBD trades but while markets are in corrections, I like to stay engaged in other short term set ups.

Often times, markets retrace from definitive moves. In this case, gold has clearly been going down the past several days. Nothing ever goes down or up forever. Therefore, there is a good chance gold retraces to the 50% to 61.8% as something of a relief rally from the selling, only to start going down again. That's the thought process anyhow. Like any trade, it isn't always right so I place a stop on the order to protect my capital.

The retracement levels described above that I'm waiting on roughly correspond to between $1600 and $1615 or so.

If you do this trade, don't be greedy. If you find after you short that the trade is working out, take an appropriate profit. At least take off have your position once a decent amount has been made and then consider where you are at at that point to decide how long to hold the rest of it.

And as always, if the trade doesn't work out, let the stop take care of it and move on and find another good looking set up.