Thursday, October 20, 2011

Buying Gold Until the Trend Breaks

Whenever one actively trades a massive bull market, such as gold today, it is best to buy near its dominant support line and sell once it veers too far from its moving averages.

I believe gold's month-long consolidation period is at its end and expect it to rally from the 1600-1625 per troy ounce level. If you look at the gold weekly chart below, you will see the past 6 or 7 times it has kissed its trendline have been excellent buying opportunities. The trend is the trend until proven otherwise.

A wise strategy to cover you in case the trend does break, is to place a stop-loss order a reasonable distance below the trendline to avoid a fakeout.

I saw people rushing in to buy gold when it started going parabolic at 1900. It was, in fact, the time to sell. We had come too far too fast. To be a good trader, you simply cannot chase stocks or commodities. This is why I will continue to belabor the point: Buy Normalcy and Sell Mania.

Chart courtesy of


  1. i agree, it's a great trade setup. Picked up some IAU today at 15.80. Stop at 15.10

  2. Cheers, Max! Good luck, I think it'll be a winner.