Kinmuku

Time Out

2011-11-21T19:35:00.000-05:00

For the near term, I am going to time out of this. I want to focus on gold trading itself and not the blog. I will consider starting this again as the end of year approaches.

November 18, 2011 (Fri)

2011-11-18T21:07:00.000-05:00

Gold closed a shade up; for the week, down 3.7%.
DMIs are bearish and in a pivot position; the ADX line is stabilized.
Both the CCI and PPO are showing continuing downward momentum; the CCI is now negative.
The 5-day EMA is very close to crossing the now downward-turning 20-day EMA.
Prices are approaching an uptrend support line, which will likely act as support.
Trade for Monday: Possible short, despite the proximity to the trendline, and preferably at the 20-day EMA and with the correct signal on the intraday chart.

November 17, 2011 (Thu)

2011-11-17T19:15:00.001-05:00

Gold closed down 2.3%.
DMIs are strengthening to the bearish side. ADX line is beginning to stabilize.
Prices closed below the 20-day EMA; the 5-day EMA is close to crossing below the 20-day EMA.
PPO and CCI are falling; momentum is clearly to the downside.
Trade for Friday: Short any rally, preferably at the 20-day EMA and preferably if the intraday chart gives a signal to do so. A trade on Friday does carry the risk of a weekend event and a bullish reaction, but again, go with the signal. Otherwise, Monday would also be a good day to look to go short on strength.

November 16, 2011 (Wed)

2011-11-16T20:17:00.000-05:00

Gold closed down 1.0%.
DMIs are weakly bearish, and the ADX line continues to fall.
The 5-day EMA is now falling, and both the PPO and CCI are rolling over.
Prices are now close to the 20-day EMA, which is at around 1747, which is close to the horizontal 1750 support area.
Trade for Thursday: None; one can go short and follow the falling 5-day EMA, but then one would have to contend with the rising 20-day EMA, which will act as support, at least initially. Therefore, it is better to hold off until a clearer sense of direction is established with the 20-day EMA.

November 15, 2011 (Tue)

2011-11-15T20:05:00.000-05:00

Gold closed up 0.2%.
The DMIs have once again crossed, this time to the bearish side. The ADX line continues to fall as prices have converged into a tightening range.
Both the CCI and the PPO indicators are showing weakening upside momentum.
Resistance remains at 1800.
Support is at the rising 20-day moving average, currently at around 1746.
Trade for Wednesday: possibly a short, but prices were under pressure early in the session but managed to bounce back and hold the 5-day MA.
Potential position trade on the horizon: with the low ADX line, it might be better to wait until there is a solid directional break/move, which should separate the DMIs and then setup for a solid position trade, either long or short.

November 14, 2011 (Mon)

2011-11-14T19:44:00.001-05:00

Gold closed down 0.6%.
ADX/DMI still showing weak trending condition; DMIs are weakly bullish.
CCI Indicator is showing increasing weakness out of the overbought zone.
PPO Indicator still shows a quick-term sell signal, and upside momentum is showing signs of weakening.
Resistance is still at 1800.
Support is at 1850, and then at the rising 20-day EMA at around 1742.
Trade for Tuesday: possibly a short trade due to weakening momentum and sell signals currently on the intraday chart; any trades executed will be posted within the hour.

November 11, 2011 (Fri)

2011-11-11T20:19:00.004-05:00

Gold closed up 1.6%.
The DMIs have crossed to the bullish side again; better still, the ADX line continues to fall, thus setting up a good position trade soon.
Momentum is steadily up again.
Support is at 1750 and then at the rising 20-day EMA, which is now at around 1738.
Resistance is at 1800, and then at around 1815-1820.
Trade for Monday: None; entering long on weakness on Thursday would have been fine for a quick trade, but entering long for a position trade carries a lot of risk, especially near a resistance level. However, if the primary intraday chart gives a sufficient signal to do so, then I will enter long AFTER the signal occurs.

November 10, 2011 (Thu)

2011-11-10T19:39:00.002-05:00

Gold closed down 0.6%.
The DMIs have crossed to the bearish side. The ADX line is still falling, so either the retracement continues or price movement remains unclear/weak.
Prices failed the 5-day EMA but recoiled up from the 20-day EMA.
Quick-term momentum is now down.
Resistance remains at 1800 and support is at 1750, and then the 20-day EMA.
Trade for Friday: None; due to other matters this morning, could not initiate a short trade at the opportune time (midmorning), and anyways, prices bounced back strongly late session. If a signal occurs on the primary intraday chart, then I will take it and post it within the hour.
Currently, the best long trade would be at the 20-day EMA, and the best short trade would be a break of the 20-day EMA. Right now it is unclear if that will happen on Friday.

Evening Update, November 9, 2011

2011-11-09T22:12:00.001-05:00

Gold starting selling off earlier this evening, getting as low as around 1755; as of 10 pm ET, prices are oversold on the primary intraday. Thus, it is better to let the oversold condition work its way out and then see how the price action looks Thursday morning, in which case I can decide whether there is a possible trading opportunity, long or short.

November 9, 2011 (Wed)

2011-11-09T18:45:00.003-05:00

Gold closed down about 1.5%.
Prices are pushing on the 5-day EMA after failing the 1800 resistance level a third straight day.
Quick-term momentum has weakened.
DMIs remain bullish but weak.
Support remains at around 1750, and then at the 20-day EMA, currently around 1730.
Trade for Thursday: Possibly a quick-term short, as the primary intraday chart gave a sell signal this afternoon. As Friday is a market holiday, however, it might be better to avoid a trade altogether. If I do execute a trade, I will post it within an hour of the trade.
The better short trade would be when prices break down from a sideways or slightly falling 20-day EMA, but for now I will consider the PPO signal line cross.
It is also possible to initiate a long trade as well, since the 20-day EMA is still rising.

November 8, 2011 (Tue)

2011-11-08T20:14:00.002-05:00

Gold closed the outcry session up 0.2%, just shy of 1800; but prices closed much lower in the electronic session - around 1786.
Momentum remains up but the CCI is beginning to roll over from an extended overbought condition.
Prices initially crossed the 1800 level but eventually failed, keeping this resistance level intact. The next resistance area above this is at around 1815-1820.
Support is first the 5-day EMA at around 1774 and then the 20-day EMA at around 1726.
Trade for Wednesday: possibly a quick-term short trade, if momentum stalls and prices fail the 5-day EMA. I will post if I do initiate this trade. Otherwise, entering long is still high risk. If prices sell off and go quick-term oversold, then this would present a long entry, which is currently the better way to go.
The last trading opportunity would have been November 1, on the long side.

November 7, 2011 (Mon)

2011-11-07T16:48:00.005-05:00

Gold closed up about 2.2%.
The DMIs crossed to bullish side, but within an overbought condition.
Both the 5-day and 20-day EMA are surging higher as price momentum strengthens.
The CCI is still overbought.
Potential Resistance: 1800; and then 1815-1820.
Support: 20-day EMA, currently near 1720.
Trade for Tuesday: None; only possibility is going long on intraday weakness, with an E-mini contract (YG); otherwise, high risk to enter long now. Aside from this, maybe a short trade on Wednesday.

20-Day EMA, Sugar

2011-11-06T14:42:00.000-05:00

I will admit, I do not know much at all about the softs, but regardless, I think that sugar prices respond very well to the 20-day EMA.

20-Day EMA, WTI Crude Oil

2011-11-06T14:35:00.000-05:00

With crude oil, one could use a 20-day EMA, although it seems to respond well to the shorter 10-day EMA.

20-Day EMA, Copper

2011-11-06T14:33:00.000-05:00

I think that the 20-day EMA works very well with copper.

20-Day EMA, Platinum

2011-11-06T14:30:00.003-05:00

Maybe it is because platinum is so volatile, but my observation is that one might benefit from using a faster EMA for platinum (a 13-day or even a 10-day), even though prices do show some connection to the 20-day.

20-Day Exponential Moving Average

2011-11-06T14:25:00.008-05:00

I like exponential moving averages (EMA), and for commodities, I especially like the 20-day EMA. My observation is that many commodities move well* to it, and it gives a fairly reliable indication that the price trend has changed. While it cannot keep up with a strong up move or a crash-type of move like the shorter 5-day EMA can, it does convey the trend (or lack of) well. Also, 20 days is close to about a month of trading, and those who position trade/invest using monthly charts can use the 20-day EMA as a timing tool for entering/exiting longer-duration positions.

Of course, some commodities move well to other durations; for example, soybean futures seem to respond well to a 13-day EMA, as does platinum. This said, I think that a trader/technician should experiment with different durations and see if the asset shows a benign "connection" to that moving average.

Besides gold and silver, I think that the 20-day EMA works especially well with copper, crude oil, and sugar, and I will post charts of these, as well as of platinum, for the reader to view.

Also, of course I think that one could use a different EMA duration for these commodities, and I think that one could use a 20-day EMA for other assets, such as for equities or for currencies. But in deciding what duration to use, it has to feel and work best for the one using it. Also, I strongly believe that any tools being used to aid in chart analysis should have their parameters set accordingly; note that on these charts, the ADX/DMI, the CCI, and the Force Index are all set to 20, in sync with the 20-day EMA. I do find it odd that so many traders and technicians, many of them passing themselves off as professionals, have little to no concept of how their tools work and how to optimize them to best effect.
If the reader is wondering, "wait, what is an exponential moving average?", then I suggest using the Charting Tools link to get better educated. I prefer the EMA over a simple moving average (SMA) because it responds better to current price action.

*"Move Well" means that not only does it convey the current price trend, but that prices will bounce off of it during a trend (i.e., during a pullback), or will break strongly upward or strongly downward from it after a sideways move.

Gold Chart, 6-Month

2011-11-06T10:20:00.001-05:00

This is the 6-month duration daily chart. Again, our focus first will be on price action in relation to the 20-day moving average. There are 3 tools we need to focus on:

First is the Average Directional Index/Directional Movement Index (ADX/DMI), which indicates trend strength and directional price dominance; second is the Commodity Channel Index (CCI), which I am using to convey oversold and overbought price conditions; and the third is the Price Percentage Oscillator (PPO), which shows the relation between 2 moving averages - in this case, the faster 5-day MA and the slower 20-day MA. Both the ADX/DMI and the CCI are set to 20 days, and so their measurements are purely in relation to the 20-day MA.

As time moves forward and I proceed with trades, I will explain what signal(s) I used to open and to close them. In the meantime, one can use the Charting Tools link to get more information about the indicators.

Gold Chart, 1-Year

2011-11-05T10:33:00.002-04:00

This is a daily chart, 1-year duration. The focus first will be on price action in relation to the 20-day moving average (MA)(orange solid line), and then the 5-day moving average (green dotted line), and then the 125-day moving average (purple dotted line). The 20-day MA represents price action over roughly 1 month; the 125-day MA represents price action over about 6 months; and the 5-day MA covers price action over a week.

As we can see, until recently the longer-term trend (as represented by the 125-day MA) had been up, and prices recently based around this MA. Also, we can see that prices dropped sharply in September but have since recovered.

A change in momentum occurs when the shorter 5-day MA crosses the 20-day MA. When the 5-day MA crosses above the 20-day MA, momentum is confirmed to be up, and when the 5-day MA crosses below the 20-day MA, momentum is confirmed to be down.

Thus, as of this week momentum remains up. However, the momentum indicators (PPO and MACDH) are signaling weakening momentum, and the CCI indicator is flashing a weakening overbought condition.

Also, at times prices may not follow a cross between the 5-day and 20-day MA, but since we have no solid premonition of what prices are expected to do of course, we have to go with what we consider the most reliable signs and signals.

Finally, this 1-year chart is meant to show the bigger picture; later, I will post a 6-month daily chart that will be the trading chart.

Welcome!

2011-11-04T16:20:00.003-04:00

Welcome to Kinmuku. In Japanese, "Kinmuku" means "pure gold". The purpose of this blog is to observe, analyze, and attempt to profit from the price action of gold, and my comments will be focused purely on price action, using mostly candlestick charts and point & figure charts, rather than on any fundamental issues regarding gold prices. Hence the blog name.
I will trade gold futures (GC) and trade both long and short.