Graceland Updates 4am-7am
Nov 6, 2012
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In the world of technical analysis, assets can be in uptrends, downtrends, or sideways consolidations. Minor trends are typically 1-3 weeks long. In contrast, intermediate trends usually last for a number of months. Primary trends are the biggest trends of all, and they can continue for many years.
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Within this context, today I want to address the concept of a technical return line, and define the purpose it serves.
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A return line helps infer where the asset might encounter resistance or support, and potentially reverse direction.
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A return line can be drawn in an uptrend or a downtrend, or even in a consolidation. The current GDX chart provides a superb example of how to use return lines in an uptrend.
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Since bottoming in May, GDX has been in an "intermediate term uptrend". Please click here now. You are looking at the GDX daily chart, with one trend line drawn across the minor trend highs. Those highs were created in June and September. That trend line is a supply line, and we use it to draw the return line.
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Please click here now. You are looking at the same GDX daily chart, with the return line drawn in there. This return line is a demand line that is drawn parallel to the supply line.
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The purpose of this return line is to suggest a price zone where the current GDX pullback may end. It is a place for swing traders to buy the market, with modest risk capital.
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If there is no HSR (horizontal support & resistance) at the point of projected impact with the return line, the amount of risk capital deployed should be extremely small.
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To see if there is any HSR present in the area where GDX may hit the return line, please click here now.
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Professional investors and institutions tend to be leery about buying anything, if there is no HSR in play. You can see that there is some solid HSR in the $49 area, making it highly likely that serious players are now ready to buy gold stocks in size. Once the election is over, they could engage in very heavy buying.
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In the biggest picture, GDX and related gold stocks are very low priced, and offer tremendous value to investors. It's easy to let a minor trend decline convince you that price is going much lower, and will "never turn up".
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I don't think you will build any wealth by trying to avoid price declines. You build it by setting realistic price zones where you will buy a little bit of stock, and GDX is approaching one of those key zones now.
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My long position in gold stocks is currently 15 times bigger than my short position. I'll make it even bigger if GDX arrives at $49 today. Don't be afraid of any number on the GDX price grid. I'd like to see the gold community look in the mirror, and show the banksters that no negative price event will shake you from your positions.
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Predators in the market want you to be afraid of price declines, so they can take your holdings from you.
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Is there a return line in play on the GDXJ chart? Yes there is. To view it, please click here now.
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I highlighted HSR in blue in the $22 area, and that roughly coincides with a possible point of impact with the return line. We can't know whether the price of GDXJ will arrive at $22, or not. We can prepare our buy orders now, to take action if it does. My buy orders are already in the market, and I hope you get yours in there today.
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Because there was so much damage done to individual junior stocks over the past 2 years, I think a price of GDXJ $50 is required to undo most of that damage.
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Technically speaking, GDXJ has been in an intermediate term uptrend since May, and appears ready to move higher again. GDXJ $50 is a realistic number, but it will take some time.
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You can make it happen "faster", by lowering the average price you have paid for your junior resource stocks. Take action on the buy-side, in the $22-$23 area.
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Do it professionally with very modest risk capital, rather than with a heroic turn call and loans from the banksters. If you can apply a little capital to this market, perhaps GDXJ $45 becomes your "I'm restored!" number.
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Today is election-day in the United States, and so far, the winning candidate is... gold! Please click here now. Gold is up nicely today, and showcasing an ideal technical situation; the green demand line and the green supply line are parallel to each other.
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Whether you use the recent minor highs or the recent minor lows to draw your uptrend and return lines, the result is the same. My interpretation of this chart suggests that gold will now rise towards $1850.
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While I believe the odds are 70% that gold will trend higher, I'm prepared for the possibility of substantially lower prices. I don't think the worst fears of investors (gold going to $1000) will be realized. If "everything goes wrong", and gold plummets, I believe you have no choice but to bring the required intestinal fortitude to the table. Endure, and profit from the situation.
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Fear must be professionally managed. To do that, it must be compartmentalized. The good news is that the next phase of this market probably won't require you to compartmentalize any fear. As gold blasts over $1805, it will be greed that we all must manage, and I think you all would agree that a little greed right now, is just what the gold price doctor ordered!
Special Offer For Website Readers: Send me an Email to freereports4@gracelandupdates.com and I'll send you my free "Greed, Fear, and Me!" report. Learn professional tactics to manage your emotions on the major asset price grids, in the midst of this super-crisis!
Thanks!
Cheers
St
GOLD THOUGHTS comes from Ned W. Schmidt,CFA as part of a mission to save investors from the regular financial crises created by Keynesianism, and the high priests of that misguided ideology. He is publisher of The Value View Gold Report, monthly, and Trading Thoughts. To receive these reports, go to: www.valueviewgoldreport.com
