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August 12, 2009 / Jeb

Gold Coiling. Coil Action May Propel Price Higher

Yesterday I was playing with my son and he had his wind up toy car.  He tried so hard to twist it and coil the spring so the car could go as fast and as far as it could go.  When I saw his eyes open wide as the car zoomed out of his hands as he let it go, I couldn’t stop thinking about the chart on gold and how many eyes will open as gold’s price accelerates.

Let’s look at the chart of GLD.


After gold’s double bottom followed by a platform breakout in November buyers moved the price higher to point A.  At this point buying fizzes out and traders start pulling chips off the table.  Now doubt comes into the picture and the battle begins between supply and demand.  This battle of force is like the spring my son was winding today…it is the tension.  The battle continues as uncertainty and doubt are prevalent.  Where the triangles meet is the apex, where buyers and sellers are at a standstill.  Only volume will tell which direction the price will go.  Volume is like my son’s hand and where he wants the car to head.  Volume is the force that tells us who is in charge.

The odds are favorable that the coil will result in a continuation of the preceding bullish move.  However, my son tonight pulled the spring so tight he broke it and started to cry.  The same way coil’s and toy cars can break so let’s pay attention.  Right now I am adding as GLD touches the bottom trendline.  A measured move should move this to 112 from this point.



Leave a Comment
  1. James Montesano / Aug 13 2009 9:16 am

    Great analogy. You build a nice technical case for the trade without being married to the positon. Refreshing considering how many will just recomend a position without mention of it possibly failing. I was really turned on to this blog when you covered your shorts and flipped long on the failed H&S pattern. Very few people out there able to do that trading for themselves let alone on a newsletter with everyone watching. Way to keep us on the right side of the trade. Keep up the good work!


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