Trade Idea: When the bear market comes, they come for everything!
Thanks for taking the time to read today's blog post where we talk about a trade idea from our esteemed CEO, Miguel Ferreira. Miguel has been trading and investing for 15 years and has recently created a private feed to help traders and investors help create long term wealth.
Nowhere has been safe in this market, after $SPX hit our target of $4,800 at the end of/beginning of this year we have seen the likes of Megacaps ($AAPL, $AMZN, $BRK.B, $META, $MSFT, & $TSLA get sold off), they have recently come for Energy, $XLE, where many have been hiding out and they are even selling off Soybeans! That's right you can do technical analysis on anything, soybeans/milk/wheat are no different as they all have price.
At the beginning of this year, January 1 in fact, we had been getting VERY bullish on Gold after being pretty bearish in 2021. Gold kept holding $1,700 and we couldn't help but getting bullish as it held this level and boy did we get that move! On March 8th Gold hit our first expected target and we were taking profits. We talk about being disciplined in our approach and this gold trade was no different.
So it hit our targets, and know we know that anyone that is short gold from when it hit our targets is doing quite well too. It's always important in trading and investing to remember there's always someone else on the other side of your trade. This trade is no different. So how do we want to approach gold (Gold Comex symbol: $GC_F) going forward?
We think it's very simple.
While recently we thought we may have completed a five Elliott Wave down pattern in Gold, perhaps we are wrong. As every great trade knows if you're wrong, the market will let you know and from the great Paul Tudor Jones we don't fight the market and always question whether our positions are right everyday.
Therefore, if we are below $1,827.67, which represents that 61.8% fibonacci retracement where we were getting bullish last week than we should exit the position and look to go short. If we continue to be right we would expect to hold $1,800 and break over $1,874 in July.
What is confirming that we are potentially wrong?
We failed to break over $1,874 this week and the 5th wave down would need a break over $1,874 to confirm a bottom. In addition, while price tried to make local new highs this week the daily RSI and MACD are diverging negatively!
What is the monthly chart saying?
This chart is brought to by our friends @TrendSpider, which shows a monthly chart of Gold, overlaid with the Fibonacci, the Relative Strength Index (RSI) and Volume Weighted Average Price (VWAP) from Alphatrends. We can see gold has tried to break out of the $20,000 level twice, however in doing so it created a negative RSI divergence on the monthly which means we were selling into that strength this year. We did just that.
Kudos to us for for remaining disciplined! The Alphatrends AVWAP from the August 2020 high is at $1,832.7 and the AVWAP from our March 2022 high is $1,904.4. The 32.6% fibonacci retracement is at ~$1,820, therefore if we continue to trade below these three important levels than we want to be short and not long. March 2021's low of $1,673 would be our second target should we initiate our short, with $1,762 being our first from the chart above.
We entered our initial position now we let the market tell us if we are right or wrong! Follow me @wizdaytrader to find out what happens next! Have a great trading day and remember to...
Essex's Trading Quote of the Day (#QotD)
"The current market reminds me of the 2008 recession."