On Thursday gold, silver, and platinum tested their support levels and rallied sharply from there. Metals are up sharply this morning and should now test resistance. The price action has been as scripted which means they should fail at resistance.
The oversold conditions in metals brought a rally which was probably a short squeeze taking out the weak hands. This price action was expected as metals reached extremes. The levels to watch to sell more are 1940 gold, 24 silver and 930 platinum.
There are three things that can happen from here, the highest probability is to reach resistance and sell off. There could be an extended period of consolidation before breaking out one way or the other or the rally can push through resistance and reverse trend.
We know that the trend is lower; we remain short. The most important trade you can make here is patience and follow the price action for what the next move will be.
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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