Chinese New Year is upon us and it’s a customary time to give gifts that symbolize prosperity. Often one will give currency, but for someone special the present sometimes takes the form of gold. 2016 might just be the year to help someone you care about build prosperity with a gift of the yellow precious metal, even if that person is you.
Using Elliott Wave as our lens on the market we can see that Gold appears ripe for a bounce. Elliott Wave tells us that moves in the direction of trend have five waves. We’ve counted them out on a weekly chart of spot gold as circle-1 through circle-5. While this may tell us that gold is in a downtrend that is likely to continue, whenever a five-wave move completes, there is always a counter-trend correction in the other direction. In the case of Gold, that correction could be headed toward 1300 – 1500, perhaps higher.
You see, even though it may just be a counter-trend bounce, it’s correcting a move that down that occurred over more than four years so the bounce can be significant, and tradable.
Helping us pinpoint the likely turn is a very specific Elliott Wave pattern called an ending diagonal pattern. As the name implies, these are only seen at the end of moves and they have specific, rigid criteria. The move down between the circle-4 and circle-5 on our chart meets those criteria and now that price has recovered back above 1191.42, the high at (4), it is more likely than not that a significant bounce has begun.
As with any uptrend, there will be pullbacks and those are usually the time to acquire.
You can learn more from David in The Simpler Options Live Trading Chat Room.