first majestic silver

Gold. Buy or Sell?

Technical Analyst & Editor
March 25, 2005

Introduction

Since the gold bull market began in 2001, each and every time when bullion takes a hit, the question always pops up : "is the gold bull market over?" There are two primary influences on why investors think and feel this way.

#1 - after a twenty year relentless bear market, it is hard to imagine, let alone accept the fact that gold can one day be the choice vehicle for investments.

#2 - since the bull market began in 2001, each new high in bullion prices are quickly met with waterfall declines, creating fear and substantial losses to those who are late to the party.

Influence #1 deals with investors psychology, which I'm not smart enough to present any type of analysis or prognosis for.

Influence #2 is easily recognized and identified thru simple chart work.

Signatures of a bull and bear market

Since the gold bull market began off the major bottom in 2001, each and every new high is sold into heavily, resulting in a waterfall, over the cliff type of plunging price action. This occurs suddenly, fast and hard, but it ends the same way it starts: quickly. These major sell offs are often over on average of six to eight weeks, although it seems and feels like eternity for those who hold gold and stocks. This type of price action is what technicians label as "right translation", as the cycles top and bottom on the right hand side of a cycle. This is classic bull market behavior, once recognized and identified by trained eyes, these major sell offs become glorious buying opportunities.

In contrast, a bear market is exactly the opposite. Slow and steady declines are often met with sharp and fast rallies, creating the illusion of a "V" bottom. This type of price action is labeled by technicians as "left translation", due to the fact that the cycle tops and bottoms occur on the left hand side of the cycles. This is classic bear market behavior, and experienced traders seize these quick but short rallies to build short positions.

The Current Situation

$XAU - this week prices plunged and now testing the major uptrend, since this bull market began four years ago, the uptrend line has acted as support and the lauching pad for the next rally, will this time be different? Who knows, but the current situation presents an excellent buying opportunity as risk/reward is well defined.

Summary

For many untrained eyes, technical analysis as presented by most market analysts is often intimidating, complex, and complicated; it is like looking at a street map of New York city! The sole purpose of technical analysis is to provide a favorable risk/reward opportunity to enter the markets, and I believe now is the time.

Good luck.

 

Jack Chan at www.traderscorporation.com

25 March 2005

Jack Chan is the editor of Simply Profits, established in 2006. Chan bought his first mining stock, Hoko Exploration, in 1979, and has been active in the markets for the past 37 years. Technical analysis has helped him filter out the noise and focus on the when, and leave the why to the fundamental analysts. His proprietary trading models have enabled him to identify the NASDAQ top in 2000, the new gold bull market in 2001, the stock market top in 2007, and the US dollar bottom in 2011.


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