Robert J. Cote, Jr.
Thirdeyeopentrades
www.thirdeyeopentrades.com
September 22, 2006
"Buying With One's Back Against The Wall"
We know a lot of folks are bearish right now and wouldn't think of buying gold stocks here. For that matter, nearly everyone we know is waiting for gold to reach $550 before even thinking of pulling the trigger. So, that got us thinking. What if the train decided to leave early?
Take this chart of the Dow Jones US Gold Mining Index, for example. Well, we've heard and read the stories about gold pulling back to $550 and even some folks are calling for a return to the low $400's. At Thirdeyeopentrades we consider buying pullbacks at times in the precious metals market. Perhaps that channel doesn't hold and gold and the stocks crash to deeper levels below. Then again, that lower channel line is the support we like to see when taking a risk and buy when everyone else appears to be selling. Keep in mind that the weekly candle will resolve after today's close as this chart's from Thursday eve.
We don't know if support will hold. But that's what a tight stop is for. What support is there?
- Channel line
- Positive divergence in MACD histogram with price
- Bull flag
- .382 fibonacci retracement
- RSI in buy zone
There's a big difference between buying support and waiting for buy signals to occur such as MACD crossovers. One wouldn't be buying off a "buy signal" here. This is an earlier, albeit more risky, area to buy. We use a tight stop in case we're quite wrong!
It's O.K. if one wants to chant along: "Hey ya hey, hey ya ho, US Dollar you must go…to deeper and deeper levels below…Puha!"
How else will we pay off our debts?
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Thirdeyeopentrades wishes you Health, Wealth, Wisdom and Happiness!
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