XAU: Respect is Earned

OMG! it looks like gold just does not want to quit. Looking back at one of my previous newsletters we anticipated a pull back on the daily chart to find an opportunity to add to our position. The chart below is a snap shot of price action on August 22nd when we projected the pull back.

Look at that we got our pull back and follow through on our buy setup. Not only did we got follow through traders but we even got a new high. Now that is what I am talking about!!!

You are probably wondering how I was able to project that price would not only pull back but eventually present another buy opportunity. The move we got from the bulls last week took a lot of buying power to establish. Buying power that could only come from big institutions. When you see big candles or moves that clear a lot of price action on the chart they demand your attention and command respect. On the chart below you can see how I have highlighted the powerful moves established by the bulls in side the grey areas and the buy zones that have been established based on these moves by the bulls inside the blue rectangle areas. A Buy Zone is the area from the prior low of a bullish candle or bullish move to the prior high. We typically look for pull backs to the 33% – 61.8% level  inside the Buy Zone. (The same applies in reverse for a sell zone created by a move from the bears.)

Now that we understand how to identify a Buy and Sell zone, your probably asking yourself how to incorporate these zones in your trading. It is easier than you think. First you must make sure that your Buy Zone is inline with your higher time frames. If it is counter to your higher time frames then you want to make sure that there is enough upside potential to your next area of resistance. In other words you want to make sure your risk to reward is on point. Now inside a Buy Zone you will see all kind of attempts from the bears to wipe out what the bulls have established. But it is your job not to be fooled by these moves, instead you want to be patient and wait for a buy opportunity to present itself inside the Buy Zone. This can be applied to any time frame but keep in mind that the higher time frames are always going to carry more weight than the smaller ones. So that means that Buy Zones on the higher time frames are always going to be stronger than zones created on smaller time frames. Now Rule number 2 is a Buy Zone is still valid until it is wiped out from the bears completely. If you follow these few rules and respect these Zones by trading with them your trading profits will soar.

GBP/USD Buy Setup

Ok traders we got what we were looking for on GBP/USD. Notice how price action reacted timidly towards the 200 MA and gave us a higher low as it bounced off of the support area at the 200 MA. Then had the strength to close back above the 8 MA OMG!. The buy setup on the daily is starting to show some follow through which is a good sign for our long position.

I have entered the market with my stop in 2 different areas. But if you are just now looking to enter this trade I would place my stop-loss under the previous candle. So our entry point would be at 1.58273, our stop-loss at 1.57415 and our initial target at the prior high on the daily. Stay Tuned!

Bullish XAU: RingGOLD Hmm! I think my mother was on to something!!!

I am big trader of gold and a lot of other commodities mainly because of my political beliefs and knowledge on the banking system and the fiat currency that is used as a medium of exchange around the world. Another obvious reason is that it is apart of my family name. As I stated in previous Newsletters whenever I have an opportunity to go long Gold, Silver or Oil etc.. I hop on the opportunity as I believe long positions are inline with my long-term bias of gold reaching all time highs as it is a necessity in today’s society, and as central banks continue to print more and more money the result is higher gold prices in the long run. With all that being said it is obvious that price has been consolidating in an ascending triangle on our Daily gold chart. The weekly chart is very promising as we have had several bottoming tails that have formed since the beginning of May. Now we are officially above the weekly 20ma and our bias has shifted to the upside on the weekly chart. With the monthly inline with our long bias and coming off of a bottoming tail that bounced off of a rising 20ma last month. OMG look out Gold is set to explode to the upside. You heard it hear and from me and my fellow colleague Jonathan Velez first GOLD IS SET TO EXPLODE so strap on your seat belts and get ready for the ride. Stay Tuned!!!

$&P 500 Trade Update were in the money!

Man what can I say S&P 500 has been a beast. I mean did we pick the right time to go all in or what. Our Long position and add has paid us handsomely. As stated earlier we were looking to take profit at the top of the channel as price makes its way into the prior high. We are up 600 points and counting and we still got some nice size on this position. I am looking to get light on my position at the prior high on the monthly. It is rare in trading to have a home run but I think it is safe to say we knocked this one out of the park. Stay Tuned!

On another note have you ever heard the saying strike while the irons hot, get to gettin while the gettin is good, ride the trend till the end, Milk it dry etc… Although it is best to ride the trend as long as you possibly can during any season in the markets. During the summer since good trades  and solid trends are far and few between  (except this week in the market oh boy) one has to try to take advantage of any trend you find and follow the money. That means ride the wave and add till you cannot add no more. Now of course you want to keep your risk in check, treat every trade separately even if they are on the same chart, and follow your trading plan. But if there is money staring you in the face on a particular pair or commodity then stick with that pair or commodity because if it is paying and the other pairs or charts are choppy then the instrument that is paying is the one that commands our attention. As you can see in the chart above I have played S&P in a major way as well as AUD this past month because these are the charts that commanded my attention. In directing my focus to these charts I was able to avoid the whip saw and choppiness in other pairs that would have more than likely resulted in me giving some profit back.

Greek Elections create uncertainty in the markets

With the Greek Election being held on 6/17/12 there is expected to be lots of volatility in the trading week ahead. Analysts have viewed the Greek election as a potential turning point for Greece. This election could result in Greece’s eventual departure from the euro zone. Central banks from major economies are ready to take steps to calm financial markets should the outcome of the Greek elections create a market storm.

With the uncertainty that looms ahead, several firms have already started reducing their exposure to European Assets. During times of major volatility and uncertainty in the market, it is best to implement a different approach. Although I feel it is best to just sit on hands and wait it out till the smoke clears. For the trader who must trade the markets this week I recommend you take on lighter positions and be more selective with your entries.

With that being said it must be noted that Silver prices did not fall as much as some expected following Spain’s $126 billion Eurozone bailout on last Sunday 6/10/12. Many investors planned for a spike in the U.S. dollar following the bailout, hurting silver prices. With everyone’s attention focused on the Greek elections this Sunday, silver prices might be the beneficiary of any more turmoil and bailouts overseas.

Looking at the Daily Silver Chart below we can see the repeated Higher Lows and Bottoming Tails. Price has made several attempts to close below the 20 MA but keeps rejecting off of our trend line and rallying to close back above the 20 creating our 5th Bottoming Tail. These are signs of a bullish reversal in the works. Since this is more of a swing trade I have a more long-term approach for this trade if we can clear the area of resistance on the weekly chart at the 20 MA. Our entry will be just above $29.05 with our stop loss at $28.07 just below the trend line and Support level 1. Our first target is at $31.00, once price reaches our initial target we will see how price reacts at the weekly 20MA. Stay Tuned!

Silver Trade Update

We have officially hit TP1 and moved our stop loss to break even. Now remember I am more aggressive with my entries so adjust my stop loss to break even as soon as 1 R is reached in my trade. You may not be as aggressive with your reentries and if this is the case I recommend that you opt to adjust your stop loss to break even after TP2 is hit.

Daily Homework Pick: Silver Trade

My trading pick for the day is Silver. Although I feel silver is very cheap at 28.13 an ounce and should be a lot higher based on it’s use and the demand for the commodity around the world. This belief does not stop me from trading on the short side when the opportunity presents itself. With that being said I see a great opportunity to short silver on the daily chart as soon the low of yesterdays candle is taken out, the trade has already triggered and is now presenting a second chance opportunity to enter. If you are looking for a better risk to reward on this trade then you can drop down to a smaller time frame and fine tune your entry and stop loss to reflect a better risk to reward.