This originally appeared as a blog post in Scott Hoffman’s Futures Insight Blog on Thursday, December 20, 2012.
Gold bugs and other “true believers” in the precious metals futures tend to be about as stubborn (and masochistic) a group of traders as there is. They go long and are able to withstand an extreme amount of pain before throwing in the towel and pitching long positions. This characteristic often makes gold and silver futures good candidates for breakout sales. That’s certainly what we got in gold today.
Below is the daily chart for February gold futures. It had been a bad week for the gold bulls as Tuesday saw a big selloff out of a breakout setup on Monday. Tuesday’s break pushed it under the 5 Nov. low of 1674.70 and support around 1668 – it’s a major Fibonacci retracement level and the 200 day SMA is at 1668.40 today.
Yesterday was another inside day with some significant range contraction and a doji –all patterns that told us to anticipate a breakout move today. We keep an open mind as to a market’s direction out of a breakout setup but the daily trend is down.
Today’s intraday chart is below. Things looked kind of negative early morning, it was under the 20 period EMA, the EMA had a downward slope and a number of the correlated outside markets were lower (grains, sugar, and crude oil). The two downside breakout points were Wednesday’s and Tuesday’s lows, both these were broken around 7:30 AM and it has been making lower highs and lower lows since – no real sign of a bottom yet.
The wheat market is another setup I’ve been talking about; the daily trend is down and it had been testing important long term support at the $8.00 level. That was finally breached this morning; this yielded an $875 / contract move to the session low. I would now look for that 800 level to be a pivot point, look to short a retracement toward it and cover shorts on a close above it.
© Scott Hoffman
Subscribe to the “Swing Trader’s Insight” for more powerful trading insights!
This is a sample of the analysis from my Swing Trader’s Insight advisory service. Receive a free two week trial to STI!
The risk of loss in trading futures contracts or commodity options can be substantial. View the risk disclosures below.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.