Tag Archives: gold

3 Elliott Techniques For Drawing Trend Channels | 20th September, 2017

The three basic Elliott Wave channels are:

1. FIRST TECHNIQUE – IMPULSE

Gold 2017
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Once enough structure is complete to begin to draw an Elliott channel (about one third to halfway through a wave) use the first technique.

A trend channel drawn using this technique may show where the fourth wave may end. If the fourth wave is contained within the channel, then the fifth wave usually ends either midway or at the opposite edge of the channel. While most markets behave this way, commodities can be different. Commodities often exhibit swift and strong fifth waves which overshoot channels, as in this example.

When the channel is breached by subsequent movement in the opposite direction, it indicates the wave is over and a trend change may have occurred.

2. SECOND TECHNIQUE – IMPULSE

Gold 2017
Click chart to enlarge.

If the fourth wave is not contained within a channel drawn using the first technique, then redraw the channel using Elliott’s second technique.

This redrawn channel may show where the fifth wave may end: either mid way or about the side opposite the fourth wave.

When the channel is breached by subsequent movement in the opposite direction, it indicates the wave is over and a trend change may have occurred.

3. TECHNIQUE FOR A CORRECTION

Gold 2017
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If the movement is expected to be a correction, then it may be contained within a channel. Most corrections are contained within channels, but a few such as expanded flats are not.

The channel may show where wave C ends, either mid way or at the edge of the channel.

When the channel is breached by subsequent movement in the opposite direction, it indicates the wave is over and a trend change may have occurred.

Published @ 06:16 a.m. EST.

2 Steps to a High Probability Trade Set-up | 15th September, 2017

This is my favourite trade set up. Here’s what to look for and why.

Gold Monthly 2017
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To begin, look for a trend line which has strong technical significance. In deciding how strong or weak a line is use these guidelines here.

This trend line on Gold’s monthly chart is drawn as a bear market trend line as illustrated here.

Gold Daily 2017
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Zooming on at the daily chart level to see exactly where the line sits, we can see that price is not sitting perfectly upon it. That may be because this trend line extends so far back, to September 2011. The general idea does appear to be working here today though.

This is the trade set up:

Step 1.

Look for a breach of the trend line. If this is achieved on strong volume, then have more confidence in the breach. StockCharts data does show very strong volume for the 5th of September, which is the daily candlestick on their data that would have been the day of the breach.

Step 2.

Look for price to curve around and back test support at prior resistance (or in a bear market resistance at prior support). Enter in the direction of the larger trend when price tests the trend line.

This set up takes time. In this case a wait of 7 to 8 days after the initial break above the trend line.

Today, the long lower wick and bullish engulfing candlestick pattern offer a little more confidence in this set up.

Why is this such a good trade set up?

With a technically significant trend line, the set up offers an entry point to a trend which traders may have confidence in. The more significant the line, the more significant the breach.

Stops may be set quite close by. Allow a little room for overshoots, and for longer held lines slightly larger overshoots, but stops may be closer than the last swing low or high. This reduces risk.

Published @ 01:15 a.m. EST.

Scale – Arithmetic or Semi-Log? | 30th August, 2017

The choice of what scale to use on your charts makes a big difference to how trend lines sit. Which scale is correct?

Gold 2 Weekly 2017
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The chart above shows Gold 2 weekly on an arithmetic scale. Notice the bear market trend line has been breached, but did not show where price exactly found support and resistance in the process.

Gold 2 Weekly 2017
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The chart above shows Gold 2 weekly on a semi-logarithmic scale. So far price remains below the bear market trend line.

An arithmetic scale is best used for short term price movements. But for long term movements a semi-logarithmic scale is more correct, particularly for markets like Gold which can exhibit blow off tops and selling climaxes.

Any long term movement a year or more should always use a semi-logarithmic or ratio scale.

From Magee (“Technical Analysis of Stock Trends”, 9th edition, page 11):

“Our own experience indicates that the semilogarithmic scale has definite advantages in this work; most of the charts reproduced in this book employ it… Percentage relations, it goes without saying, are important in trading in securities… certain trend lines develop more advantageously on the ratio scale.”

From Pring (“Technical Analysis Explained”, 4th edition, page 68):

“Arithmetic scaling is not a good choice for long-term price movements, since a rise from 2 to 4 represents a doubling of the price, whereas a rise from 20 to 22 represents only a 10 percent increase… For this reason long term price movements should be plotted on a ratio or logarithmic scale. The choice of scale does not materially affect daily charts, in which price movements are relatively small in a proportionate sense. For periods over 1 year, in which the fluctuations are much larger, I always prefer to use a ratio scale”.

Published @ 04:28 p.m. EST.

Learn Elliott Wave – Spot The Mistakes | 3rd August, 2017

For those who want to hone their Elliott wave knowledge, have a go at spotting my deliberate mistakes:

Gold Daily 2017
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This one is easy (at least, I think it is and I’ve really tried to make it easy).

There is one mistake in the triangle (just one!) and one mistake in the impulse.

Can you find them both?

Name the rules which I have deliberately broken here. Answers will be posted in comments tomorrow or the day after.

Note: During the process of preparing this post, I found a solution that fixes my main problem with the current alternate wave count. This solution will be published in tomorrow’s Gold analysis.

Published @ 05:49 a.m. EST.

Volume Basics | 2nd August, 2017

Volume analysis is essential to a full technical analysis. One of the simplest techniques is to look at volume during a consolidation and note which days, upwards or downwards, have strongest volume.

Gold Daily 2017
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Gold has been within a large consolidation since about January 2017. A small resistance zone is about 1,295 to 1,300. A wide support zone is about 1,195 to 1,215. During this period of time, it is two upwards days that have strongest volume and this suggests that an upwards breakout may be more likely than a downwards breakout.

This technique does not always work, but it works more often than it fails. This technique is an exercise in probability and not certainty.

Published @ 04:00 a.m. EST.

Drawing Bear Market Trend lines | 27th June, 2017

One of my favourite Technical Analysis texts is the classic “Technical Analysis of Stock Trends” by Magee. In this book Magee describes how to draw trend lines for bull and bear markets.

Gold Daily 2016
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To draw a trend line in a bear market draw the line from the high to the first major swing high within the bear market. Extend the line outwards. Assume the bear market remains intact while price remains below the line. When upwards movement breaks above the trend line, it is an indication of a potential trend change from bear to bull.

My definition of a breach is a full candlestick above and not touching the trend line.

This technique works on all time frames.

This chart is on a monthly time frame and indicates that Gold may remain in the larger bear market, which began on September 2011.

This analysis is published @ 03:02 a.m. EST on 28th June, 2017.

Drawing Trend Lines? Simple is Best | 27th June, 2017

One of my favourite Technical Analysis texts is the classic “Technical Analysis of Stock Trends” by Magee. In this book Magee describes how to draw trend lines for bull and bear markets.

Gold Daily 2016
Click chart to enlarge.

To draw a trend line in a bull market find the first two major swing lows, then draw a line across them. Extend the line out to the right. Assume the bull market remains intact while price remains above the line. When the line is properly breached, it is an indicator of a potential trend change from bull to bear.

This technique works on all time frames.

Gold began a series of higher highs and higher lows on the daily chart after the low in December 2016. Within this upwards trend, the first two swing lows are taken as the 27th of January and the 10th of March. This trend line has now been tested eight times, with downwards movement for the last session of the 26th of June being the eighth test.

How Gold behaves at this trend line in the next few days will be a strong indicator. Does the bull run continue or is it over?

This analysis is published @ 03:43 a.m. EST.

GOLD Elliott Wave Technical Analysis – 23rd February, 2017

An upwards day with some increase in volume has broken above resistance.

The main Elliott wave count was invalidated and the alternate Elliott wave count was confirmed.

Continue reading GOLD Elliott Wave Technical Analysis – 23rd February, 2017