As expected, gold and silver tumbled hard on Tuesday taking them down and slightly below their key levels of support. Both bounced nicely from those key levels and are well above them now. This brings the question, have gold and silver bottomed or is there more selling to come?
How do we decide if the bottoms have been made or there is more selling to come? We don’t. The trend is lower; our assumption is the selling should continue and Tuesday’s action was predictable based on their patterns. This does not mean the bottoms are not in, but until the trend changes, we remain short.
We know that markets don’t send out announcements or telegrams on what their intentions are, they leave a footprint. The late rally on Tuesday may have been the bottom or may be another selling opportunity. No one knows the answer. The footprint will guide you to the next move and it is your job to follow.
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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