Jun 142009
 
Gold posts head and shoulders top

Gold posts head and shoulders top

Gold has closed below the neckline of what looks like a nice head and shoulders top. The neckline itself lies at 944, and will become a major resistance if the metal continues to slide towards its first target around 900. Readers will remember that I have been calling for a significant downmove in Gold, most recently in my post of 7th June.. If last Friday’s close below the neckline is validated by a continuation of selling this week, then it only reinforces the view that we might have completed the 2nd retracementof an extended fifth wave in Gold. The significance of that view is the downside target is way down, and the down move could be with a speed that surprises a lot of traders. So take care.

  9 Responses to “Gold posts head and shoulders top: 14 June 2009”

  1. thanks .I have been waiting for the opportunity for a so long time.

  2. Abboud of RAK posted a question to Pavan (I deleted it by mistake, sorry). The question was: Pavan: However, It may simply not happen. Then what?
    My answer is every trade is a bet. It either works, or it doesn’t. If we wish to make money, we take a risk. How much we can afford to lose is a personal matter. Take the case of Gold. If we get a pull back to near the neckline, we should sell, with a stop on a close above the neckline. That is not a perfect stop, but it allows us to take a low-risk trade. If we get stopped, the trade didn’t work out, ie, “it didn’t happen!” Then we take our loss, and wait for another signal. Can we afford a series of losses? We can, if we are careful about our position size.

  3. Ramki,

    You should consider an alternate count on gld that looks more plausible than your count. I suggest that we are about to go in to wave 3 of wave 5 that should take us above 1100 on gld. Since commodities tend to extend in wave 5, 1100 is conservative.

    http://img193.imageshack.us/img193/1453/screenshot11pxa.png

    The correct count should resolve shortly ;)

    Let me know what you think…….

    • Hi JC, I am currently under the impression that the fifth wave already finished at 1030 on 17 March 2008. If that top was only the end of the third wave, then it was a huge 3rd wave extension already, and we will probably get a ‘normal’ 5th wave. Usually only one wave in a sequence extends, although occasionally there are 2 extensions. As I often tell readers, we will never know until a move is over. So the best a trader can do is to choose a low risk point to open a position, and place suitable stops. Are-chair analysts have the luxury of changing their counts as the market proves them wrong. Traders have to risk real money to make some.

  4. where is best position to trade a head and shoulder formation? Is it at the pull back going to form the other shoulder or to wait for a break form the neck?

    • Hi Kingsley, A head and shoulders top is not confirmed until we get a break below the neckline. I have seen innumerable ‘potential’ H&S formation transform into something else with passage of time. Most of the time a break below a neckline happens on high volume, although high volume is not a pre-requisite for the formation to work if we are talking of a ‘top’. When it breaks on high volume, you will normally have missed selling near the neckline, and would be better off waiting for a pull back.

  5. Hi Ramki: Have you looked at Neo-wave ; The wave-counts come distinctly different and of’cse highly complex. Currently Neely is showing a bullish count subject to 899 risk

    Cheers

    • Hi KRG, No, I haven’t looked at their analysis as it is subscription based. Also, it is important to be faithful to any ONE count until proved wrong. That is the only way to survive using wave analysis. I could be wrong on Gold, and just as likely, so could Neo Wave. We will know only later. Being right or wrong is only an ego trip. To protect the bottom line, we have to stick with one approach, and use sound money management techniques. Good luck.

  6. Hi,
    I think that in GBP / USD we allready have a pretty top. What is your opinion ?

    Regards!
    Pavel

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