Yesterday afternoon I was talking to another trader about the gold futures. We were talking strategy for it today in light of today’s FOMC meeting. I told him I wanted to buy it today. Yesterday was a down day, a Sell Short day according to the Taylor Trading Technique. That meant today was a TTT Buy day with yesterday’s low at 1661.00 basis Feb. futures as today’s reference price.
Tim (the trader I was talking to) didn’t call me early this morning; I’m kind of glad he didn’t. I thought gold looked pretty weak; I wonder if I would have talked myself out of buying it. There was Fibonacci retracement support at 1653.80 and the 1650 area is a psychological pivot point but the weak action made it hard to get excited about buying it – a basic tenet of TTT is to trade when the market confirms the trend you anticipate. That means you buy when a market is rallying, you don’t buy into a selloff.
Gold did start moving up as the morning went on as bargain hunters came in. I thought I would wait for the FOMC meeting announcement to trade again as the Fed announcement would likely be a trigger for market moves this morning.
A morning rally pushed gold back over Tuesday’s high around 10 AM but that rally fizzled ahead of the FOMC announcement; giving another opportunity to buy if/when it traded over Tuesday’s high a second time.
5 minute chart
The communique really didn’t hold any surprises, although the Fed stated their intention to keep rates low through late 2014. This was taken as a green light to buy, and a good rally ensued after 11:30. I used Tuesday’s 1661.00 low as a trigger price for a buy (the morning high at 1662.80 would have been a more conservative entry).
Tim and I were talking right after 11:30; we both agreed that Monday’s high at 1681.80 was the first rally target. This was reached about 20 minutes later and ended up being a launching point for extending the rally.
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The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
