Tuesday’s Gold trade played out to script; the metals were under some pressure. The initial speed of the rally was too parabolic which cannot continue, there must be mean reversion. Tuesday traded as expected, but now what?
Gold bugs before you jump and send me all the reasons Gold should go higher, remember the trend hasn’t changed, we are long and looking for the rally to continue. Too many traders and investors watch the market tick by tick which is just dumb.
All markets build patterns, go through phases and the fact that Gold did as expected, it makes us more bullish. When markets trend higher, we look for pullbacks to buy. The best traders are objective and know that markets don’t go straight up or down.
We are long Gold and Silver, looking for a steady move higher. There is a little more room to the downside however the overbought conditions have been resolved. Gold should hold 1850 with a small possibility of 1840 and still be bullish, while Silver must hold 23.25 with a possibility of 23.00. In other words, buy support levels.
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
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