I had two questions this weekend: one was from a student of one of the past Chart Reading Mastery courses. He was asking about the recent activity in the Gold market. Last week on Friday, the intraday market sold off sharply, then reversed and rallied briskly up putting in new highs on the day, and also for the week. How does one deal with this? Is it supply overcoming demand or demand taking out supply? Is there a way to tell?
The other question was from a person asking whether the Wyckoff Method would be workable for non-day trading time frames.
On the 5-minute chart, Friday’s action did look dramatic. Frankly, it is very hard to tell if a market is going to have a V-spike reversal like it did. One clue is the volume, but that isn’t always easy to read when volatility is high. We certainly don’t want to be trying to buy “a falling knife.” It is not something I try to trade.
It always pays to keep the higher time frame picture in mind. Structure is something we emphasize in Chart Reading Mastery. Trade setups that are consistent with structure have much better odds of playing out in our favor.
Looking at gold, we can see the structure this morning on the 60-minute chart is conducive for a long trade. Among other things, the pullback has not drawn out supply. It has been well-behaved in the trend channel off Friday’s high. We see evidence of buyers stepping in on the hourly chart at the bottom of the downtrend channel flagging a buy spot. For day-traders, the 5-minute chart also had a spring this morning (5-minute chart not shown, but you can see the spring location from the green arrow on the 60-minute chart) setting up a low-risk long trade. It now needs to rally father above the 60-minute supply line to continue the momentum seen Friday.
Gold is an interesting market here. You can see on the daily chart that the market has been trading around its current price level level for several months (blue line). Pushing back up and above Friday’s close could trigger a decent rally. Breaking much below today’s low could bring sellers in and send the market down lower. Overall, this situation could be of interest for the longer-term trader.
So, from both a day-trading and a longer-term perspective, we can take a market and understand its structure, locate choice trade locations where risk is defined, understand what it must do next, understand what it shouldn’t do, and also see it’s larger potential. We will see how this one plays out.
As past students know, we look at all time frames in Chart Reading Mastery. We will be starting this course on April 4. It runs for eight weeks and always fills up (we have to limit the number of members because of the weekly chart reviews and individual feedback given to each member). It will not be given again until next winter. If interested, you can learn more here:
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