Robert J. Cote, Jr.
Thirdeyeopentrades
www.thirdeyeopentrades.com
July 20, 2007
Cracking the Code Finally Launches
It has been instructive to see how important horizontal resistance can be and how, occasionally, working with diagonal trend lines can throw off speculated outcomes. Several months ago we were working with diagonal resistance and thought "Cracking the Code" had launched. We were wrong and wondered if the signal, having made it public knowledge by publishing essays and newsletters around it, had stopped working.
Well, it hadn't. Let's examine the chart.
Cracking the Code requires a simultaneous three signal move at the close of a trading week:
- Price break thru resistance
- MACD break thru resistance
- Ratio break thru resistance
All three signals have broken thru resistance and a "sustained upward leg" is now in progress.
Our error in calling the event last autumn laid with the presumption that the ratio horizontal resistance line being broken was sufficient for the beginning of a move which never materialized. Now that we can look back on it, a horizontal resistance line developed which has been sufficiently taken out topside this week.
Keep in mind that precious metal stocks like to zig when you think they may zag. They'll move higher than you think and fall not as far as you fear. Based upon past behavior, one might anticipate some consolidating for the next few weeks like they did on breakouts past such as in September 2004 and August 2005. But, then again, a pullback here isn't a guarantee. If they do pull back and the volume lightens…well, we have our shopping list ready. Do you?
So, where will this leg end? That's a good question. We think one can look for a test of the April 2006 high at least and perhaps as far as XAU 210. If the XAU stalls near the April 2006 high, then a consolidation back to Ice (formerly, The Creek) wouldn't be a bad thing in order to build even more energy. One shouldn't necessarily wish for the gold stocks to go parabolic. Far better there be a steady "advance-back fill-advance" over the next several years in order for prices at the end of the bull market to reach the magnitude we think they're capable of.
An acquaintance asked us last week when we revealed that we wrote a newsletter on primarily, but not only, gold stocks if the price of gold was near $300 an ounce. When they learned it was that day at $677, they couldn't believe it.
It appears the general public is nowhere near becoming involved in the sector. Let's keep it that way for a while longer.
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Thirdeyeopentrades wishes you Health, Wealth, Wisdom and Happiness!
Thirdeyeopentrades is not a registered financial advisory service and is not a broker dealer. We do not and cannot give individualized market advice. The information in the newsletter is only intended for informational and educational purposes. It should not be considered a solicitation of an offer or sale of any security. The reader assumes all risk when trading in securities and Thirdeyeopentrades advises consulting a licensed professional financial advisor before proceeding with any trade or idea presented in this newsletter. Thirdeyeopentrades may take a position and sell a position in any security mentioned in this publication. We share our ideas and opinions for informational and educational purposes only and expect the reader to perform due diligence before considering taking a position in any security. That includes consulting with your own licensed professional financial advisor.
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