Gold futures in the June contract settled last Friday at 1,309 while going out today around 1,290 down by about $20 for the trading week as the Ukrainian situation has stalled sending gold prices back down into the recent trading range. Gold futures are trading below their 20 but right at their 100 day moving average as prices have been consolidating in the last 5 weeks trading in a $30 range as I’ve been sitting on the sidelines waiting for a better chart pattern to develop but if you are looking to get into this market on the long side I would buy at today’s prices placing my stop at the 10 day low of 1,365 risking around $2,500 per contract and if you’re looking to get short this market I would sell at today’s price while putting my stop loss at 1,310 risking around $2,000 as the chart structure is relatively tight at the current time. Gold prices rallied from 1,180 all the way up near $1,400 an ounce 2 months ago so this is basically the 50% retracement and I think you will see a consolidation for quite some time so keep a close eye on this chart as it appears to me that a breakout is looming.
TREND: MIXED
CHART STRUCTURE: EXCELLENT
Is it Time to Admit That Gold Peaked in 2011?
Silver futures in New York continued their bearish trend this week settling last Friday at 19.55 finishing lower by about $.45 for the trading week as I still think there’s a possibility that a spike bottom occurred in last Fridays trade as $19 has been very difficult to break on the downside. Silver futures have come all the way from slightly above $22 in late February all the way down to today’s level and from $35 in 2013 so this is been a bear market for well over 1 year as there seems to be a lack of interest, however eventually silver will turn around and join the rest of commodities higher but at this point there’s just very little interest. Silver futures are trading below their 20 and 100 day moving average telling you that the trend is lower and as I’ve talked about many times before if you have deep pockets and you’re a longer-term investor I think prices down at these levels are relatively cheap and if prices went lower I would continue to dollar cost average as there is real demand for silver.
TREND: LOWER
CHART STRUCTURE: EXCELLENT
Here's our Critical Line in the Sand for Silver
When Do You Add To Your Winning Trade? This has always been a very interesting question because it can create a situation of going from rags to riches or from riches to rags in a very short amount of time. Many times I see traders abuse pyramiding or adding to positions with utter lack of any type of money management system in place and letting it ride which usually ends up in a complete wipeout of capital and sometimes even worse.
Commodity prices can move very quickly with large gains or loses like we experienced in the 2008 crash of stock and commodity prices, so you always have to use stops and not fall in love or marry a position. In my opinion the answer to this question is add only once to the trade if that position has made you at least 2%-3% of your account balance while still having stop losses on all positions that equal 2% loss at a maximum risk. Remember your stop loses will be different on both positions because of the fact that you entered those trades at a different date and price.
There are many different theories about how long does a meaningful consolidation have to last before you enter a trade on the breakout to the up or downside? In my opinion I always want to see a consolidation that lasts at least 8 or more weeks before I would consider entering. The reason that I want a longer consolidation is to try and avoid a bunch of false breakouts such as a 10 or 15 day consolidations which happen all the time, so I am trying to put the odds in my favor by trading the breakout of at least 8 weeks or more and the longer such as a 11 or 13 week consolidation the better. At this present time cocoa is in a major consolidation.
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