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Precious Metals Give Traders Another Opportunity

We know many of you follow our research posts and have been waiting for the Gold/Silver setup we predicted would happen near April 21~24, 2019 back in January 2019.  Well, it looks like our predictions were accurate and the current downward price rotation in Gold/Silver are the opportunities of a lifetime for precious metals traders.

Our original research regarding the predicted Gold price rotation and breakout initially posted in October 2018 and was updated in January 2019.  You can read our updated post here.

This research suggested, back in October 2018, that gold would rally above $1300, then stall and setup a momentum base near April 21~24, 2019.  Currently, we are actively seeking entry positions in Gold, Silver and many other stock market sectors related to the metals and miners.

We’ll start by highlighting the Gold to Silver price ratio.  When this ration moves well above 80, it is generally considered a long term buy trigger.  The reason for this is that this ratio attempt to reflect the price of Silver to the price of Gold.  When this level reaches above 80, it traditionally reflects an extremely cheap price ratio for both Gold and Silver and usually prompts a big price advance in the near future.

 

Taking a look at historical price moves for both Gold and Silver, we fall back to the big upward price advance that began after the 2009 market crash.  One thing that all traders and investors must understand is that, currently, Silver presents an incredible opportunity for bigger returns than Gold.  Yes, Gold will likely rally higher and provide an incredible opportunity for upside gains.  Yet, historically, Silver begins to move a bit later than Gold does and the upside potential of Silver tends to be 40~70% greater than the upside potential for Gold.

Take a look at this comparison chart, below, of the 2009 to 2011 price move.  Gold shot up nearly 100% – as shown on the chart.  Silver shot up over 150% when the breakout move happened a bit after the Gold move started.  We expect the same type of price advance pattern in the near future.  We expect Gold to begin the move higher and Silver to lag behind this upside move a bit – possibly for a few months.  Eventually, Silver will break to new multi-year highs and could rally 130% to 220% above current levels – possibly higher.

 

Over the next few months, we believe increased volatility in the US stock market may drive prices a bit lower as price rotates near all-time highs.  We believe this rotation, coupled with foreign market concerns (think Brexit, Europe, China, South America) as well as the US Election cycle may cause the markets to enter a period of stagnation and sideways trading.  These impulses may become a catalyst for precious metals to break recent highs and begin an upward price advance as a general increase in FEAR settles into the global markets.

We do believe Gold and Silver will likely move a bit higher over the next 30+ days as the US stock markets continue to push higher towards new all-time highs.  Yet, if the volatility increases, as we expect, and a bigger price rotation takes place (see the chart below), we believe Gold and Silver may experience another price drop to near or below current levels before a massive upside breakout move begins.  Historically, the price of Gold contracts throughout the initial price correction phase of the S&P500 and begins to accelerate upward near the end of a correction phase.  This is because investors and traders are typically shocked to see the correction take place and move into a protective mode as true fear sets in.  When fear subsides, traders move out of precious metals and back into stocks.

 

Our current expectations are that Gold will continue to push lower, below $1275, in an attempt to establish our April 21~24 momentum base.  This base should be at or near ultimate lows for the price of Gold and we would expect a pennant or sideways price channel to complete this bottoming formation.  Ideally, any price move below $1250 is a gift for skilled traders.  We’ll just have to wait to see where this bottom sets up before we know just how low Gold will fall before the next leg higher.

We believe the next upside price leg in Gold will push prices above $1400 initially, likely in May or June 2019.  After that peak is reached, we believe a period of rotation and a potential for a price decline is very real.  We believe this next leg higher will really to levels above $1400, then price will stall and retrace – possibly retracing back to levels below $1300 again.  It would be at that point that skilled traders should consider this the last opportunity for long entries before the bigger move to the upside.

 

Our research into this move, which initiated back in October 2018, has called these rotations almost perfectly.  If our newest research is correct, you will have at least two opportunities to enter fantastic long trades in Gold and Silver, one setup hitting between April 21 and April 28 and another setup after the initial upside price rally retraces (likely in June or July 2019).  After that last retracement, we believe the bigger upside rally will begin and both Gold and Silver will initiate a rally that could be an opportunity of a lifetime for skilled traders.

Follow our research by visiting www.TheTechnicalTraders.com to learn how we can help you find and execute better trades in 2019 and beyond.

Chris Vermeulen

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What’s Next for Stocks, Gold, Silver, Oil & Nat Gas?

December 13, 2009
The past three weeks have been interesting to watch as the Dow (DIA ETF) has broadened causing traders to be shaken in and out of positions. Commodities have been under pressure as the US dollar has risen. Below are some charts of these investments and what I think could happen in the next couple weeks.

DIA – Exchange Traded Fund
As you can see the broadening formation is bearish as it results in a short term pullback. This type of price action is what frustrates breakout and novice traders. As traders jump into positions once the previous high is broken, they hope for a rally. Instead the market briefly moves higher then reverses and moves down to penetrate the previous pivot low. This is where breakout traders place their stops and as the market knows this, it obliges by moving below this level to shake out these traders before it rallies again.

That being said, it looks like stocks could make a new high this week, just enough to suck in more short term breakout traders before rolling over once again to test a deeper support level. A pullback to the $99-100 level would make for a great buy point.

DIA ETF Trade

DIA ETF Trade

GLD – Gold Exchange Traded Fund
The strengthening dollar is putting pressure on precious metals with gold testing the first support level. Depending on what the dollar does in the coming days we could see gold test the second support level.

In my opinion gold can test the second support level without triggering any major sell signals for traders and investors. The trend will still be up and it is important to know the horizontal support level is more important than a trend line support level.

GLD Gold Trend

GLD Gold Trend

SLV – Exchange Traded Fund
Silver is in the same boat at gold. Only time will tell if we get a bounce or a further test lower. Either way, the underlying trend is still up and we will be able trade it.

SLV Silver Trading

SLV Silver Trading

USO – Oil Exchange Traded Fund
Oil broke down out of its bull flag last week and is currently testing both trend line support and horizontal support levels. We could see a short term bounce here to the $37, 38 or 40 levels. Taking money off the table at each resistance level and raising your stop is an important money management strategy I use for this type of play.

This is a high risk type of play which I am not taking part in. But I do find it fun to track plays like this for educational reasons.

How to trade Oil

How to trade Oil

UNG – Natural Gas Exchange Traded Fund
The natural gas fund is a touchy topic with so many traders. I get emails every day asking why I trade UNG because of the contango and the fact that so many people have lost money with it; they don’t want to touch it again. My answer is very simple, it works perfectly fine for short term trading which lasts 1-20 days. “If it works, Don’t Fix It”.
I do agree UNG is tougher than other ETFs to trade, but it still makes money and that is what our goal is.

Anyways natural gas has found some support and is bouncing around. We could see it trend sideways or up until a test of our blue resistance trend line is reached. From there we can asses the situation for a possible trade.

The underlying trend is down on the monthly and weekly charts so do not get too excited about going long anytime soon.

UNg Natural Gas Trade

UNg Natural Gas Trade

ETF Trading Conclusion:
Overall the market feels a little top heavy and the price action on the charts are saying the same thing. My short term indicators are telling me the Dow (DIA fund) is over bought and ready for a couple days of selling. With any luck we will see a test of support which will flush out most short term traders this week, then a nice low volume rally going into Christmas. On the other hand, the market has been holding up well and prices could continue to drift higher from here. If that is the case we simply continue to hold our current long positions and enjoy the ride.

Silver and gold are testing support levels and if the market continues to rally here, I figure precious metals will follow. But if we see stocks pull back and test support, then we will most likely see the metals pull back further also.

Crude oil has formed a scary looking chart as it flushes out traders on this recent drop. My general rule for spec plays is to buy when the chart looks scary, but is trading at multiple support levels. It is very difficult to buy at these levels but as my good buddy David Banister from ActiveTradingPartners.com always says, “Buy when they Cry, Sell when it’s Loud”. Meaning buy when everyone is panicking out of their positions, and sell when everyone is buying into the move usually seen by high volume levels and much higher prices.

Natural Gas is jumping around like crazy. We continue to wait for a tradable price pattern to form in conjunction with a support or resistance level to help put the odds more on our side.

If you would like to receive my Free ETF Trading Newsletter:

Chris Vermeulen
www.TheGoldAndOilGuy.com