Trader Scott’s Market Blog
October 1, 2016
Two extremely important tools to understand in markets are the TREND of the market and the SUPPORT and RESISTANCE zones. There are three TRENDS – up, down, sideways. Most people slough off the sideways TREND a.k.a. the TRADING RANGE. I believe it is the most important. It’s what sets up the other two TRENDS. Even if you don’t actually trade those ranges (I love trading them), it’s very important to understand what they are setting up. There are four main concepts to understand. Virtually every major UPTREND is preceded by a large, sometimes massive, ACCUMULATION area/bottoming process. Like in gold for the about 18 years into the final bottom in July, 1999 (chart #1) – and that area even continued for several years after that. It is the main reason why I am so wildly bullish on gold long term. Those accumulation areas are what give me the “staying power” to sit thru the reactions/selloffs in markets as the UPTREND is taking hold. When a market has been under accumulation for a while, it is then under the control of the STRONG HANDS. I trust the strong hands. They are not fools, they know what they are doing. I can’t say the same thing for myself, so I follow/emulate what they are attempting to accomplish. I completely respect the power of those accumulation areas. And basically ditto for the DISTRIBUTION areas except inverted.
And the other two TRADING RANGES are RE-ACCUMULATION and RE-DISTRIBUTION. As for re-accumulation, this is an area where a market, which is already in an UPTREND, reaches a big resistance area and is unable to get thru the first time. So it needs to back up and RE-ACCUMULATE to build the potential energy so that it can bust thru eventually. For instance, if you’re hiking in the woods and you come up to a small stream which is a bit too wide to walk across – but if you backed up and then ran, you could then jump across – same idea. So I believe that is what is going on in gold presently. Basically ditto for RE-DISTRIBUTION areas except inverted. And the charts below are annotated showing the SUPPORT and RESISTANCE zones on different time frames. I ONLY buy into weakness, so the support zones (actually below) is where I become interested in buying. But to clear things up, that is nota “prediction” (I have zero power to predict anyways) of where a market is going. That is only where I believe the RISK is the lowest and the PROBABILITIES are the highest – the opportunity to enter is the best. If gold keeps going higher without first getting into my buy zones, then so be it. I also NEVER chase a market higher. I let it come to me – patience. So right now the support zone for gold is $1306ish. Meaning, I need to see prices below that before I would even be interested in buying. And lastly, I feel better about gold now that we’re in Q4. I will feel even better when we get into November.
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Trader 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.
October 1, 2016 @ 9:51 pm Xploregon
I’m a bit confused. I think I get it trading wise but, sitting where we are this weekend, Au is at +/- $1,316. As a phiz stacker would you buy or, wait for a short term consolidation nearer $1,300?
October 1, 2016 @ 10:02 pm traderscott
I’m not a stacker, per se, but I am quite long PMs on an investment basis. I have written how I approach this business – always from a standpoint of RISK. No, I would not buy at this price. But that doesn’t mean you shouldn’t. But if you’re astacker, I would say that any price weakness is a “gift”.
October 10, 2016 @ 8:29 am John
Hello Scott – Thank you for this post. I understand much of it, but I still have a question. In you charts for this post you specify that the TRADING RANGE is $1306 to $1378. Could you please explain how you determine this range?
October 10, 2016 @ 10:35 am traderscott
From the high (resistance line) and the lows (support line) – so all of the trading within that zone. Understanding and being able to work with trading ranges is extremely beneficial John.