For the past three weeks gold and silver have been stuck in a tight trading range indicating a much bigger move is coming. The pattern we are watching is known as consolidation which is simply a short-term battle between the bulls and the bears.
All markets spend about 65% of the time in this pattern which torments trader’s and investors alike. The rotation that takes place in consolidation is simply a battle between the strong hands; bulls buy until a point and then the bears sell to a point. This rotation creates many false starts in what’s next.
Nobody knows the direction of the next move out of consolidation; however, we know that the longer it lasts the bigger the next move will be. Depending on whether you are trading or investing there are different ways to trade this pattern.
As of now, the trend is lower for gold, silver, and platinum. We are short gold and silver expecting the next big move to be lower. There are no guarantees that we will be right, but the trend is the trend until it changes. The ranges we are watch are 1900-1960 gold and 24.5 -26 silver. Until one of these levels are violated, consolidation will continue.
Precious metals should be owned on a physical basis with capital that is not needed tomorrow or anytime soon. Trading should be done with paper knowing that we can trade either side without emotions.
In all markets price action determines what will happen in the next day, week, or months. Keep the two strategies separate, the worst trade anyone can make is turning a trade into an investment hoping for a way out. Traders must learn to take their losses and move on to the next trade.
Patience, discipline, and money management always win the day. Let the map of the markets show you the way.
Todd Horwitz Chief Strategist BubbaTrading.com
Stop being a prophet and make profits
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