Gold and How Support and Resistance Areas Form

 

September 15, 2016

Trader Scott’s Market Blog
For several months I have urged the folks who missed the couple of INVESTMENT opportunities in gold stocks in late 2015/Jan 2016 to be patient and to wait for the next INVESTMENT opportunity (there have been several TRADING opportunities). Here is how I myself am viewing both the INVESTMENT and the TRADING opportunities as of today.
The first chart is a bigger picture chart of GDX. The miners have been in an ACCUMULATION zone which began in April 2013. They basically still are. But we are now in a situation where most people get confused. It’s the murky area when a market is in the early stages of an UPTREND, but in the latter stages of ACCUMULATION. It’s when you will still see the dominant characteristics of ACCUMULATION at times. But now alternating with the dominant characteristics of an UPTREND at times. But for strategy purposes, you should view it as an UPTREND. And in an UPTREND, an extremely high PROBABILITY/ low RISK entry point is at, or a bit below, the SUPPORT areas. Strong hands (“manipulators”) want to buy the miners into weakness/fear. (AND IT IS THE “MANIPULATORS” WHO IN LARGE PART FORM THE SUPPORT AND THE RESISTANCE ZONES BY THEIR ACTIONS.) “They” are “speaking” to us. “They’re” “speaking” to each other. “They’re” “telling” us what “they’re” doing by “their” actions. I don’t listen to “their” pronouncements/announcements/news/LIES. Because that’s what “they” WANT us to do. And “they” NEED us to do what “they” want us to do, exactly because that’s how “they” can consistently “rip us off”. Don’t listen to what “they” actually say with their press releases, etc. Don’t do what “they” want us to do. “Listen” to what “they'” do with “their” actions. Do what “they” actually do.
The 32 area is formidable RESISTANCE. We will very likely blow thru it and by many multiples. But that’s in the very long term. A lot can go right (and wrong) in the long term. We’re humans. We can’t predict anything. But we can make “educated”/experienced judgments about both RISK and PROBABILITIES. Understanding that concept is how we excel in markets. And we can execute upon that concept by patiently waiting for only the very “best” entry points/opportunities. And if/when those entry points present themselves, that’s when you want to be “greedy”, not fearful. You should be fearful when everyone else is greedy and visa versa. But what invariably happens is that people will do the right thing and wait patiently for a great entry point. But when that entry point arrives, they freeze and don’t act because they become afraid like the rest of the herd. So they do nothing. And then the market starts rallying without them. And let me tell you, if that is truly a superb entry point, then the market will usually have an explosive rally right from those lows. So they get mad at themselves and therefore they chase the market higher and higher trying to buy. But that never ends well. And how do I know about this exact situation which so many folks often do. Because I used to do it myself. I literally had to train myself and force myself to reverse my normal human instincts and become “Comfortably Numb” in those volatile situations. It’s another survival technique.
So to finish up the charts. The second chart is a shorter term entry point chart – the gateway into the bigger picture. I have marked off my BUY ZONE and AGGRESSIVE BUY ZONE. I use buy zones for shorter term trading. I am very impatient about taking partial profits (when available), when I buy into buy zones. I never use buy zones as a place to enter long term trades/investments. Admittedly, sometimes they turn out to be great places to buy for the longer term. However, if the market really takes off higher from these lows, I guarantee that I’ve sold most or all of my position already – “too early”. Oh well. That’s life as a speculator. I only use aggressive and very aggressive buy zones as long term trades/investments. (All investments are trades to me, just longer term trades.) And from these areas I am then much more reticent to take profits (when available). I literally have to walk away at times, so that I don’t have the urge to sell.
The last chart is a very short term view. I expect that the market will see more retesting of the lows.

 

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About

img_0074bwcrsmTrader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.



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'Trader Scott – Gold and How Support and Resistance Areas Form – September 15, 2016' have 2 comments

  1. September 16, 2016 @ 8:22 am Martin

    Scott-

    Great post. How would you manage the trade if you bought for a trade in the “buy zone” and price kept falling? When would you cut your losses?

    Reply

    • September 16, 2016 @ 6:57 pm traderscott

      Great question Martin. And I just realized that I didn’t make that buy zone comment too clear. The buy zone is below the thick black line. That would be the very top of the buy zone. And anyways, cutting losses is a personal comfort thing also. If it’s a SHORT TERM TRADE, it should be on a tight leash. If it’s a much longer term thing, it needs to be on a much less taut leash. As I stated, that buy zone is still a trade for me, but a bit bigger picture trade than the 5 minute chart trade. And I don’t use physical stops, per se. Just mental stops. So in that situation, I tend to make my decision to pull the plug as to whether I’m still uncomfortable/confused? – about how the volume is “acting” at that time. But in general remember and respect what your time frame is for that trade/investment. And tight leash or taut leash. But I understand that you’d like to hear a point value for this GDX trade. Let’s say for the shortest term trade here, about one point stop. In the aggressive zone about a three or so points stop. So you can take it from there Martin.

      Reply


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