Sometimes opportunities and potential trading setups come along that seem just too good to be true. In my time at Safety in the Market I have met many traders and had discussions with optimists and, let’s say, the not-so-optimistic. There is no doubt that our most successful traders are optimists. In trading, one element that all successful traders have in common is a belief that there will always be another great setup and the Gold futures market (GC-SpotV) has delivered a setup with awesome potential.
If you have attended any of my workshops over the last couple of years (from Trading Tactics to Gann Mastery), there is a good chance that you have seen my major bull ranges work on Gold. In case you aren’t familiar with this work, Chart 1 will bring you up-to-speed.
Chart 1 – Gold Monthly Bar Chart – Major Bull Range Projection – 200%
click chart to enlarge
In brief, Chart 1 takes the previous major bull range on Gold (August, 1976 to January, 1980) and projects that range over the current bull market that began in February, 2001. The reference range is:
Point A: $100.00 (25 August, 1976)
Point B: $873.00 (21 January, 1980) Range - $773.00/ounce
Point C: $255.10
Chart 1 illustrates the success of the Pressure Points associated with these ranges. The focus here is on the 200% pressure point, which we get by adding two lots of $773.00 to $255.10:
$255.10 + (2 x $773) = $1,801.10.
It is this $1,801.10 level that is going to be our focus. Chart 2 takes a closer look at the daily bar chart for the past 18-months:
Chart 2 – Gold Daily Bar Chart – Potential Triple Top at 200%
click chart to enlarge
We are looking at a potential triple top almost right on our 200% pressure point of $1,801.1 per ounce:
Top 1: $1,804.4 (8 November, 2011)
Top 2: $1,792.7 (28 February, 2012)
Top 3: $1,797.7 (4 October, 2012)
Triple or double tops that are months apart like these require a greater degree of caution when it comes to trading the confirmation. That statement is also dependent on your level of trading skill and experience. At this stage of the game, we have not seen a first lower one-day swing top, but it is still very early days.
Here are a few ‘Golden’ facts:
- The exchange symbol is GC (traded on COMEX)
- Gold is quoted in US dollars per ounce
- The minimum price movement (tick) is US$0.10
- Each tick is worth US$10 per contract, as each contract controls 100 ounces
- We are currently trading in the December contract, which will be the case until around the start of the last week of November
- The code in ProfitSource is GC-SpotV
I’m watching Gold futures regularly throughout the day to keep my finger on the pulse. The third top (4 October) is an outside reversal day and a false break of the second top (28 February). The 4 October top actually offered an intraday short trading opportunity with an entry around $1790.0 but the mechanics of taking that trade are beyond the scope of this article.
This setup has excellent potential. And at this stage, it is just that - nothing more than a ‘potential set-up’. Should this triple top hold, there will be plenty of opportunities to go short.
To develop your knowledge and confidence in trading futures, the Online Interactive Trading Workshop and Advanced Trader Coaching are both excellent programs.
Until next time…
Professional Derivatives Trader