Look at me, putting the correct date at the top of this page. I am really stringing ’em together now!
Not too much to report this evening. Our two open trades continue to advance a little and then fall back a little. The trailing stops maintain their careful watch over our behinds – sorry about that, trailing stops.
I had promised that we would look at the futures or the underlying instrument that fuels our stock chart symbols.
Tonight, let’s take a look at Gold. Just the sound of that word is fantastic. Enough of that, to the chart, Gollum…
The chart just above us – look up – is of the spot price of gold (my precious). As we can see, based on our moving average system the 8 EMA (Exponential Moving Average) (red) is above the 21 EMA (blue) and they are both above the 55 EMA (green) that we are in an uptrend.
Our setup therefore is for a long trade. Our triggers: the price and the red EMA have obligingly closed above the blue EMA. We should be good to go. Our problem is the resistance level shown by a horizontal, black line. This level is proving to be quite the barrier. It is why I added support and resistance considerations to our simple moving average system. Because they can be so darn important to the success or failure of a trade. It is why I like to use stop-buys, so that I can get the price above resistance, congestion, whatever. We should have put our stop-buy for UGL just above the candle that CLOSED above the resistance level.
There are other exciting reasons for doing so. I detail them thoroughly in my book, Basic Trading. Take a look, click:
Even though we live in a world of trades and stick our tongues out at the trading world, is there some clue we can get that might tell us what is in store for our gold trade.
Let’s take a look at the RSI. Typically used as an oversold/overbought measure. It doesn’t help us much in our world of trades. I will give you a little insight into a better way of using this indicator. I actually go deeper in my course which will be available for purchase fairly soon. Typical bearish measures for the RSI are between 20 and lower to 60. The bullish measure from 40 to 80. These boundaries can be adjusted by examining the history of the symbol.
Since mid-March you will notice that the RSI has had trouble clearing the 60 level. Whereas prior to mid-March, the readings venture a little above 80 a couple of times. When the RSI ventures into the other territory, it is a warning that things may have changed. It is looking as if the RSI is telling us that it is remaining with the bears.
This was more of an intellectual exercise. We would still place our trades based on our process. Some of you may take my course and decide you like the predictive abilities of the RSI. Or, let’s call them “set-up” abilities. The set up at the moment is bearish, consequently, you don’t take a long trade. You would not be long UGL – the gold ETF – like this blog.
That does it for gold.
If you have any comments or questions, please drop me a line at: firstname.lastname@example.org