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Some cold hard wisdom from Rambus Wednesday Report tonite
One of the most important questions we have to ask ourselves when we enter the markets is, “what timeframe are we going to trade”? If one is going to be a day trader then they need to focus on the minute charts to get their information. A short term trader will need to look at the daily charts. For me personally I strive to be an intermediate term trader where the trade can last from a few months to a couple of years if the trend is very strong. If one is looking to buy a stock as an investment to hold onto for severals years or longer then the long term monthly charts will best be suited for your investment needs.
My experience has shown me through the years that trying to catch every turn a stock makes will eventually be a losing proposition. There are traders out there that have the discipline and knowledge to be successful but they are the exception rather than the rule. For most short term traders it’s like going to a casino and playing the slot machines. You may have a hot streak and do well for a while but eventually the house will win back your winnings and then the money you used to gamble with.
There is nothing easy about trading the markets from taking a position to selling that position and everything in between. In taking an initial long position you hope you can get in low enough to be able to handle the first reaction that almost always happens. It’s that first reaction that can take you out of a perfectly good trade at the absolute worst time right before the move you were originally looking for takes place. Discipline dictates that we must use a sell/stop to protect our investment capital which is a necessary evil and placing that sell/stop can be very diffucult at times. Once you get some breathing room you can then start adjusting your sell/stop to at least lock in some profit if the trades starts going against you.
We are at that point in the PM complex right now. We got positioned at a pretty decent price for most of the trades, got a decent move higher and now we are getting that first reaction backdown to test the breakout point. This is the point that if one is a short term trader you take your profits and run waiting for the next setup. Since I’m an intermediate term trader I have to respect the bullish setup that got me in the trade and hope I set the sell/stop low enough to keep me in the trade before too much damage is done if it gets hit while I wait for the impulse move to take place.
Lets start with the daily chart for gold which is the reverse symmetry chart we’ve been following since the double bottom / double headed H&S bottom. So far gold has been acting pretty much as we have expected. The price action is now trading right in the middle of the 2018 five point rectangle reversal pattern in which there are alot of folks that went long and are now looking for a place to get out even, which creates supply. As you can see gold has eaten through almost all of the 2018 rectangle, supply zone, and is now correcting backdown. So far this is exactly what we want to see, the bulls eating their way through overhead resistance, taking a break to digest their gains, and then make another assault into the resistance zone. At some point, if the bulls are in charge, there will be no more bears left to defend the top of the trading range and the bulls will then break through as the bears will retreat to higher ground before they can setup their next line of defense. This is how a bull market works which is just the opposite in a bear market. We still have neckline #2 as the backtest area which comes into play around the 1290 area.
Full report for members.
I’m happy to see the point on knowing what timeframe you’re using. First of all it’s absolutely correct. Second of all it give’s me a 2nd opportunity to blab indulgently some comments I nearly posted to Plunger’s recent posted comments about a recent Bottom.
I personally (using my home-made technical indicators) identified what I thought was The Bottom in 1998 and plowed aggressively whatever I could into PM stocks. Arguably that Bottom was a couple of years later, but either way, from one time-frame somewhere there was The Bottom (or you could have argued the 1970s, when some people I knew discovered The Bottom). I of course readjusted the portfolio according to how the individual stocks were turning out and my own financial needs, but I held from 1998 onwards and added when I could. Regrettably I sold too many stocks around 2010 through 2015 (especially 2015). It would have been more convenient overall simply to have held, readjusting here and there. Early 2016 I identified another The Bottom so I quickly bought to make up for the error (from my long term perspective) of having sold a lot in 2015 and prior years. If you look at charts with a certain timeframe early 2016 is The Bottom. Or you can use a shorter term timeframe to see a more recent The Bottom. It really does depend on timeframe. Nothing of course says that Au isn’t going to $35/oz or even below zero (heavy penalties for owning, efficiently enforced), but for me The Bottom has been 1998 with a minor one around 2016 (and some intervening somewhat minor ones such as 2007-2008 era) until proven otherwise. Or 1970s if you prefer.
In my case, using a longer term timeframe, I see a downturn or impending downturn as simply an opportunity to get rid of the junkier holdings and some of the way overbought good ones, maybe pay some expenses, and start looking for unrecognized bargains to pick away at.
Where The Bottom has been really depends on your timeframe and how much you trade depends on taste, how much you like reporting sales to tax authorities, and the like. Knowing the timeframe is important. Thanks for indulging my blabbing on timeframe.
Jean Valjean.?
Les Misrables
🙂