Pattern Review:
Symmetrical Triangle (Pattern in Black)
1. On November 21 when the rest of the market was printing new lows, the GLD had a Breakaway Gap, putting a measured move target of 85.39 IN PLAY, but the pattern was skimpy in terms of width, and the GLD had to rally into nearby resistance. Breakouts and breakdowns often get retested. Those two factors suggested that this one would be coming back.
2. The retest was a knuckle-biter for anyone who was long when the GLD went well below the top of the Symmetrical Triangle breakout intraday, on December 5. The "logical stop" for the trade was 72.00, the "last low" prior to the breakout. That held, and the GLD rallied into the close and stuck it at the top of the Symmetrical Triangle on a Bullish Hammer.
3. When the GLD came roaring back into the close, that was a very, very nice low-risk entry, using the 72.00 stop.
Rising Channel - (pattern in green)
1. Oh, buddy, look st the rally that ensued from that December 5 shakeout low! Where would we expect the rally to go?
a. We KNOW that we still have 85.39 IN PLAY from the Symmetrical Triangle.
b. We KNOW where the top of the channel is on the rally.
c. The 85.39 target MADE. The Top of the Channel target MADE.
2. The Top of the Channel target MADE on a Bearish Inverted Hangman, at the 200DMA, which was Bearishly Inverted with the 50DMA. That turned out to be a Fakeout Breakout, suggesting a return to the bottom of the channel.
Bear Flag (pattern in red)
1. From the Fakeout/Breakout high, the GLD traded sideways with a slight upward bias, in a Bear Flag.
2. January 5 was a gap down from 86.23. The low of that candle was 85.84. The January 6 high was a partial gap fill. The high was 85.70, so we've still got a little unfilled gap from 85.70-85.85. It's 85.70-86.23 if we include the gap down from the close, but a print of 85.84, technically, would fill that gap in the daily chart. We won't be picky ;)
3. The little candle circled in red was a "sell pivot" candle, based on the 13/21 RSI being at Bearish Synchronicity, and the 83.75 low of that candle getting taken down in the next session, so a print of 83.74 based on that "early warning" indicator was a SELL, on January 9.
4. January 10 was a Breakaway Gap to the downside, breaking the Bear Flag, and putting a measured move target of 76.91 IN PLAY (leave a comment and ask, if you don't know how to measure that), leaving another gap on the chart from 83.09. Notice that's only six cents away from the downside target of 76.91 is a gap at 76.85. Gaps don't always get filled, but given the target, that gap sure looks like a magnet.
5. January 14, the GLD returned to, and broke, the bottom of the channel, which was suggested by the December 17 upside Breakout Fakeout. Shorting that break, or shorting the retest of the broken channel on January 15 certainly is defensible, but we had TWO unfilled gaps on the way down, and the broken Bear Flag never was retested.
6. The January 16 gap up open STRONGLY suggeted at least a retest of the broken Bear Flag, and possibly a fill of those gaps. The bottom of the Bear Flag came in at 82.6922. The close was 82.71, just about smack on the bottom of the Bear Flag.
Summary: (geez, this is long-g. Sorry)
What do we KNOW? Not "know the future," because we can't. What do we know, as of the last candle's information? We know that the GLD has made three bearish moves:
1. The December 17 "Breakout Fakeout."
2. The Broken Bear Flag
3. The Broken Channel
We also KNOW that a target of 76.91 went IN PLAY on the Bear Flag breakdown. It goes ON HOLD if the GLD moves above the bottom of the Bear Flag, which it could do, to fill those gaps. It goes back IN PLAY if the GLD goes back below the flag.
We KNOW that the December 5 candle was a HUGE downside fakeout/shakeout that filled a gap, then closed on a Bullish Hammer, so on a rally here, we want to watch those gaps above. Those gaps were what kept me from shorting Friday's close AT former support (the bottom of the flag), which "should be" resistance. Another factor that kept me from shorting Friday's close is the obvious fact that the January 14 Channel breakdown possibly was a Fakeout/Breakdown, just as the December 17 candle was a Fakeout/Breakout.
I'm going to watch for an immediate sign of failure right here, or a rally to fill the gaps, that fails.
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