Gold, Silver and SP500 Trading Charts/Video
Source: Chris Vermeulen, Technical Traders (5/17/10)
Last week was amazing for both gold and index traders.
The added volatility makes trading more difficult because price patterns become less predictable and price movements are much larger, increasing risk for traders.
Below are the charts and videos of what to look for in the coming days. . .
GLD—Gold ETF Trading
Gold continues to trend higher at an accelerated rate. Friday, we saw gold pull back and test a key support level; then it bounced to close in the middle of the day's trading range. As you can see, the trendline support has become very steep; and once the trendline support is broken, I figure there will be a sharp drop to digest the recent rally.
SLV—Silver ETF Trading
Silver popped and tested a key resistance level from a previous high as expected. It also tested the top of its trend channel providing even more resistance. This week will be interesting as we wait to see if precious metals have a small pullback or continue to rally.
SPY—SP500 Index ETF Trading Chart
The past market drop shown in this chart clearly shows what I think is about to unfold. Because the mini market crash is triggering everyone's stops already, I figure we have made the low; and the dip we are seeing now will drift down a few more percentage points before bottoming out.
ES M0—SP500 Mini Futures Trading Setup—Pre-Drop
Looking to profit from a falling stock market, we shorted or bought the SDS bear—ETF trading fund—last week. As you can see from the chart of the SP500, we saw the ES mini contract drift into a key pivot point on light volume. What this means is that a large group of sellers will be waiting at that price, and because volume is light we know there are not many buyers at this price level. Simple supply/demand comes into play, with more sellers causing the price to stop rising and eventually forcing the price lower, which is what we were anticipating.
The green arrows show key support levels on the 60-minute chart, where 1/3 of a position should be taken off the table to lock in gains, reducing overall risk on the trade. Once we cash in the first 1/3 of the position, we move our protective stop to the breakeven, which is the entry-point for the remaining portion of our position. This turns the trading into a winner no matter what happens, allowing us to enjoy the ride. . .
ES M0—SP500 Mini Futures Trading Setup—Current Price
Here is the same chart 24 hours later showing both of our profit targets triggered, pocketing 2/3rds of our position for a very nice gain. Depending on the type of trading vehicle you traded, there was potential to make up to 150% return in less than 24 hours.
We currently hold 1/3 of the position left with a loose stop, allowing the trade to mature in case the downtrend continues for several days or weeks. If not and the price rallies, then our stop will get triggered for small profit on the balance of the position. Either way, we win.
Pre and Post Market Correction Video:
Stock Market ETF and Futures Trading Conclusion:
In short, the market is trading on increased volatility, making it difficult to find low-risk setups. At the moment, we are long gold and short the SP500, with both positions deep in the money. All we can do now is manage our positions to make sure we maximize our profits.
If you would like to Get My Trading Signals be sure to check out my services at: