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Catch the Next Gold
by Chris Vermeulen
The next gold bull market could be
just around the corner and with thought in mind; it has many traders and
investors on edge, because they are worried they could get left behind. In the
past few months, gold has been extremely volatile, making it difficult to hold a
position for those of us who think gold could push much higher still.
We all know the market is moved by
greed and fear and making decisions based on greed and fear, 9 times out of 10,
leads to a bad decision, AKA a losing trade. Below is a simple strategy to
average into gold, so that you will catch the next gold bull market.
Signal #1 - The Short Term Gold
Trade, Daily Chart
These trades happen once every month
or so for long and short trades, depending on how aggressive you are. Some of
these setups carry a high risk level, which is over 3% in my opinion, so I tend
to only catch the odd trade here an there. I measure risk from my support trend
line or where I would place my stop order, if the trade was to go against me.
Keeping risk low is critical, because it is very easy for us to be forced out of
a position due to wild price swings.
The hui chart below is an example of
a short term buy signal, which happened last week. When the hui generates a buy
signal, traders can purchase gold ETF’s, gold stocks or bullion with a small
position of their capital. These trades generally only last 2-20 days and I like
to take some profits on the first sign of weakness, like a reversal candle. But
sometimes other time frame charts align, giving some short term signals a very
strong signal for higher prices, which is what we have going on now. These
signals are shown in the next couple charts.
Signal #2 – The Weekly HUI:GOLD
Breakout, Very Bullish
This is a very bullish sign, but
until we see a clean move higher, we will not know for sure if this is a head
fake or not. This chart shows the strength of gold stocks compared to the
strength of gold bullion. As gold stocks start to perform better than the price
of gold, this chart moves higher. Gold stocks generally lead the price of gold,
so this is very bullish for this chart to breakout to a new multi month high.
This chart helps tell us how strong a possible short-term trade could be.
Signal #3 – Buying More on Dips,
Daily Gold Chart
Signals 1 & 2 have confirmed its
time to start to accumulate more of a position on pull-backs to the 50EMA and
trend line support zones. This chart shows many things and could be a little
over whelming, but just focus on the right hand side of the chart for the most
recent setup/signal. You will notice how gold has a 50 & 200 moving average
cross over, which puts gold back into a bull market. It also shows everything
starting to align for a 50 moving average bounce, which also happens to be trend
line support. The large reversal candle signals a buy position here. Risk is
currently over 3%, so you will be trading at an increased risk.
Signal #4 – The Monthly Long Term
Currently the monthly chart is
several months away from any buy signal. We will focus on the bullish looking
daily and weekly charts for entry points, while keeping an eye on the monthly
chart of gold stocks.
Gold Trading conclusion:
Gold and gold stocks look to be very
bullish on a short to intermediate time frame. Both have generated a buy signal
in the past week and with the HUI: GOLD ratio chart breaking to a new high along
with the HUI (gold stocks index) making a new multi month high, things look
bright for gold.
Gold trading does carry a relatively
high-risk level and that is why I focus on my trading model, which keeps risk
low. My focus is to keep my risk per trade under 3% and by doing so, I can
afford to have some losing trades, which still allows me to average up in gold,
as it moves through the bottoming cycle towards a possible bull market again. I
do the same but in reverse, when gold or oil look to be nearing a bull market
If you would like to receive my
trading reports please visit my website:
Vermeulen is Founder of the popular trading site
There he shares his highly successful, low-risk trading method. For 6 years
Chris has been a leader in teaching others to skillfully trade in gold, oil, and
silver in both bull and bear markets. Subscribers to his service depend on
Chris' uniquely consistent investment opportunities that carry exceptionally low
risk and high return. Reach Chris at: Chris [at] theGoldAndOilGuy [dot] com
This article is
intended solely for information purposes. The opinions are those of the author
only. Please conduct further research and consult your financial advisor before
making any investment/trading decision. No responsibility can be accepted for
losses that may result as a consequence of trading on the basis of this