In trading, timing is (almost) everything

Traders know full well that you can be right on a market – and still lose money.  That’s why getting your timing of entries right is absolutely crucial – and my Tramline method last week has proved itself worth its weight in gold (literally).

I have been trading for many years and it never fails to impress me when my analysis gives me a precise target (in advance) which points to a low risk trade, as it did in gold and silver (and other commodities) on Monday, just before a massive move in my direction.

I had taken partial profits in April at around the $1280 level and was waiting for the A-B-C correction to complete, which I had earmarked would happen at around the round-number $1200 level.  This target was based on chart support and following an established Elliott wave guideline.

I advised VIP Club members to get ready to buy just under that level.  Orders were hit as the low on Monday was 1199.50 – and the market never traded below it for the rest of the week for a super-low-risk entry.

Of course, my analysis was vindicated yesterday with a mammoth $40 jump – with a similar move in silver on the back of a stinker of a US jobs report.

This is what the gold chart now looks like:

Monday’s low touch point enabled me to place these tramlines where my upper line covers the three major highs accurately.  The lower line has two lovely Prior Pivot Points (see my book, Tramline Trading).

But before the bulls should get too excited, the move up off the $1300 high is a likely A-B-C – and there is plenty of resistance up ahead, especially in my target zone in the $1250 – $1260 area.

OK, with a terrific low-risk long trade working, I have to perform the hard part – deciding when to take profits.  It is said that any fool can get into a trade, but it takes real skill to get out successfully (and that is one of the many benefits that VIP Club members enjoy).

Here is a closeup of recent action:

At this stage, I cannot say if the rally will turn out to be an A-B-C or a five up, but there is little doubt that yesterday’s action is a small-scale third wave (it is long and strong).  The market is clearly in an impulse wave up.

And this rally was clearly hinted at by recent movements in the COT data. To May 31, hedge funds had continued their bearish posture by reducing their long positions heavily.  With that increased bearishness, the scene was set for a rally on the well-established principle that the trend-following hedgies are maximum wrong at a major market turn.  And I love taking money off them – thanks. guys.

Silver tags along

Not to be outdone, silver also zoomed up yesterday by 40 cents – a massive move.  And VIP Club members were ready.

We had already positioned long around the $16 area – and the reason?  The lovely trendline was meeting the C wave of an A-B-C down and also the Fibonacci 38% support at $16.  In addition, there was also massive chart support from the October high.

What more did I need?  I certainly did not believe the bearish opinion of most of the pundits who claimed precious metals (PM) were headed for the bin as the Fed was about to raise interest rates.

That is a common misconception anyway – PM prices do not always react badly to rising rates (see 1970 – 1980 period). But yesterday, they confounded the pundits, which is very satisfying.  They herded – and it rarely pays to herd with them.

Stocks rallied with gold?  Really?

Normally, when gold zooms up by $40, you can be sure risk is being taken off the table and stocks are sold.  But not yesterday!  After an initial knee-jerk dip, stocks fully recovered losses to end unchanged.  This is entirely consistent with my idea that stocks remain in a bull run that should produce new all-time highs in the Dow/S&P

I have a lovely tramline pair along the A-B-C decline, the tramline break and kiss and now a renewed push up.  We are in the final fifth wave of this phase.

If you want to know where I believe commodities, stocks and currencies are heading now, I invite you to join my VIP Traders Club.