Candlestick Trading Blog
As gold prices waffle between $1,900 and $1,800 an ounce after a decade-long upward run it might be time for Candlestick analysis of gold prices. Gold futures for December delivery have fallen to close to $1,800 peaking over $1,900 as the precious metal takes a breather from an increase of nearly thirty percent in 2011. A useful Candlestick signal at this point could be the Doji Candlestick. The Doji is a good indicator of an uncertain market and during market trends can predict a market reversal. The Doji Candlestick is virtually flat with rather long upward and downward shadows. What this tells us is that the equity, in this case gold futures, gold stocks, or gold exchange traded funds, opens and closes at roughly the same price. However, during each day the equity price runs significantly higher and lower than the opening. This is a sign of an uncertain market. In an equity that has been going up it tends to predict downward reversal and in a downward trending equity it tends to predict an upward swing. The Doji does not tell us where the stock price, commodity price, options price, or gold bullion price will go next in a flat market, only that the price is likely to change.
Apparent strengthening of the dollar and indications that the European Union will not let its weaker members go bankrupt have weakened gold recently. Fundamental analysis of gold prices has primarily had to do with the immense debt burdens carried by many nations and the worst recession in three quarters of a century. However, all of the fundamentals are discounted quickly by the market. Candlestick analysis of gold prices gives traders an objective view of market sentiment and allows them to avoid falling prey to the trading psychology of fear and greed that so often prevails in periods of market volatility. Looking to the future many gold traders contend that currencies will continually fall in value across the world and that gold will rise, as related to the dollar or other currencies. This was the same argument made throughout the 1970’s as gold rose from $32 an ounce to over $600 an ounce in early 1980. Then gold corrected as the US drove interest rates up. It ended up in the $200 an ounce range which is where gold investing remained for two decades. Today we are a decade into a bull market for gold and at a time when Candlestick analysis of gold prices can help traders decide whether to buy gold, sell gold, or trade options on gold futures or stocks. Candlestick analysis of gold prices - with Japanese Candlestick Charts - can be profitable. Gold has gone up nearly eight fold in price in the last decade or more. Anyone who bought gold around the year 2000 has done well. However, gold, like all commodities has had its peaks and valleys as its price has risen. Traders using technical analysis tools like Candlestick charts have been able to profit with each significant rise and fall in gold prices, surpassing the profits earned by those who simply bought and held gold bullion over the last decade. Now as the gold rally enters its second decade smart traders are aware that gold can go down in price as easily as it can go up. By following trading patterns with Candlestick pattern formations as a guide, traders can obtain a clear view of market sentiment and both profit from upswings in the price of gold and avoid being caught in a big market correction. If, for example, the US raises interest rates and gold prices plummet, like in 1980, Candlestick analysis of gold prices could lead to profits instead of losses. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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