Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

August Gold

Figure # 6.17 - The June 9th low at $423.00 marked the beginning of a seventeen-day rally that ended at $444.20 on the June 23rd swing trade date. In Chapter 2, (see Figure # 2.19) I explained how the TR pattern and the (C) to (D) Reaction swing could be used to project the price move from (C) to the swing trade date at (E). However, what I didn’t tell you was how a failed swing pattern on May 31st  signaled a major change of trend before the (C) to (D) Reaction swing was formed.

August Gold created a low pivot at $419.20 on May 2 (A). Gold followed with a four-day correction before it gapped sharply lower and made a new 20-day contract low on May 31 at (B). The new contract low marked the end of a five-wave down trend.

1-Day one – May 31 - Breakout bar – After being closed for Memorial day, August Gold opened $4.90 lower. This put the futures market below the previous low of $419.20 at (A). Gold went on to hit a low price of $415.80 before regaining some of the lost ground and finally closed at $418.90. However, the close was still below the previous low at $419.20 (A).

2-Day two – June 1 – The trading session ended as an inside day with a close at $417.70, the second consecutive close below the previous pivot low.

3-Day three – June 2 - Gold began the day with a slightly higher open, but a flood of new buying caused the futures market to surge higher and break above the previous pivot high and close at $424.80. The close was well above the high of the Reaction swing and also above the 20-day SMA. The futures market timing had reversed and the trend shifted after the bearish swing pattern had failed to continue the downward trend.

gold chart26
Figure # 6.17 – August 2005 Gold

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**THE RISK OF LOSS IN TRADING CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER-COMPENSATED FOR THE IMPACT IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT.NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES.

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