Tuesday, October 12, 2010

October 12/2010

DAY 6 OF BREAKOUT, October 12/2010

Fibonacci from todays fed meeting is this chart above. Fibonacci is playing well. Because of this we are in a major indecision move on a fed move which can play screwball on the day following and a day or two sometimes. Its current pattern is showing that since the run higher it had a price correction and thus a consolidation of time showing indecision on this move. This is why those fibs level are important. It is bullish. By trading this you can ensure lower stops below the 38.2% when you are at the level on this chart. The risk side is not only commissions and spreads but because of a tight stop loss, the losing trades would outweigh the winning ones. However this can enable a higher winning percentage if stops do not get violated. This can work to massive profits with an original small risk. The Silver daily chart is still in a hold situation because the 5 day has not been violated and the 23.6% can't be tested. Thats why when a reversal happens, $1.00 of the move may come from profit taking this longer rally. Therefore if you play this with a stop below the 38.2% then $23.25 or 24 cents is a stop level. If you play the last support area, it has established at $23.35 and thus stop below the line at 33 or so cents makes it have lower risk. As the market rises, the stops should also. Fibonacci and established recent levels work the best I think. This way when you have those levels you can find another nice number that is lower of that level. When previous levels match the fibonacci then it can even be stronger and thus making it easier to read the market. The longer term charts continue to scream bullishness with the market still in need of developing some support either through time or price.

The path of least resistance remains higher as it has held above the five day moving average during this run higher and the trend line that was violated to the upside last Tuesday has not been a failed move. A failed move in this case would be if it either re-entered the previous trading range it had been in the last couple of months or if it sold off and started an intermediate term bear market. What this is looking to do is maybe make a new range to the upside where the previous resistance line becomes a support line and a new resistance level will become established. It is still early to tell what will happen from the trend line breakout. It has not had an explosive gain as of yet.

INTERESTING ARTICLE I read today says that JP Morgan is predicting that Gold will trade consistently above $1,400 in 2011 and Silver will trade in a range from $21.50 and $22.50. It's funny that it happens to be JP Morgan whom has shorted so much of this precious metal to actually come out and give us this kind of propaganda. We'll wait and see what the future holds, and it'll be interesting to see if JP Morgan will be able to predict the demise of the fiat currency and banking sector.

One of these moves will be a failed move. Either the break of support on this descending triangle or the breakout of resistance. From a failed move usually follows a fast big move in its opposite direction. With the federal reserve speaking today, I doubt a fast move will happen from this pattern, but when the fed kicks off after 2pm EST, the fast moves will follow!

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