The Secret To Trading Volatility

November 12, 2016

What a week! Markets were wild and materially moving, beginning Sunday evening in the futures market and not really calming down until Friday.

I remain in cash waiting for setups, which are starting to form now. I knew the election would create massive volatility. However, I had no idea which way it would go.  To my surprise it turned out to have gone both ways.

To try to trade it would have been a coin flip…and that isn’t my style. The only safe way trading high volatility, is to not trade it and stay in cash.

As for precious metals, they were wild also. The gold price was up $50 the night of the election, only to fall back and end the week on an extremely sour note.

Gold was hammered and ended the week off by 6.15%.

Quite the wild week indeed seeing gold so strong, only to fail and break hard, below the 200-day moving average on heavy volume.

To be sure things are still settling out from the election results…so it’s too early to say the sky is falling.

The long-term monthly chart still looks fine to continue higher. However, this volatility needs time to settle down first. Let’s see how support at the $1,210 to $1,200 area holds. Frankly, I do expect it to hold.

Cash is a position while we wait for easy, more reliable setups.

Silver fared a bit better losing only 5.38%, but breaking the 200-day moving average. Silver is holding the $17.15 support level well so far…but time will tell.

Platinum was hit, losing 6.10% and quickly nearing support at $930. Heavy volume on the downside isn’t great but everything is a bit out of whack this week after the elections. Consequently, let’s just wait and see how things settle out in the week ahead.

We should see a clearer picture of trends develop in the week to come.

The outlier this week was palladium who soared 9.59% for some reason. Strange to see palladium so strong but not much makes sense these days. We stopped dead at the $700 resistance level - and above is resistance at $725.

Let’s see how the week ahead goes. However, a little rest at $700 should see a move to $725, then some consolidation and then another leg higher, if the chart works as it should.

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Warren Bevan is a renowned trader who’s honed his craft over the years learning the styles and techniques of Jesse Livermore, William O’Neil and Dan Zanger and forming his own unique style. He focuses on making money and going hard when the right markets present themselves and during the rest of the time focuses on capital preservation.  He focuses on the leading fast moving stocks during the good times.  He is a proud Canadian, traveler, explorer, and consummate market geek who tells it as he sees it. Warren’s website is www.wizzentrading.com and his email address is warren@wizzentrading.com

A gold nugget can be worth three to four times the value of the gold it contains because they are so rare.