After the horrible trade the last couple of days, gold and silver are charging higher. The real question: is this another trap, or is the rally real? Unfortunately, we don’t know the answer; this could be the next leg up or a great selling opportunity.
What we know today, the trend is down, metals are overbought, and resistance is higher. The levels to watch are 1820 gold and 20.60 silver. A close about those levels could turn the trend; however, they must get there first.
As traders, we must remember that trends don’t turn that quickly; there are many signs and indications before it actually turns. Based on recent price action, we consider this a bounce in a bear market. Remember, the most vicious rallies come in bear markets.
Precious metals should be owned on a physical basis with capital that is not needed tomorrow or anytime soon. Trading should be done with paper, knowing that we can trade either side without emotions.
In all markets, price action determines what will happen in the next day, week, or month. Keep the two strategies separate. The worst trade anyone can make is turning a trade into an investment hoping for a way out. Traders must learn to take their losses and move on to the next trade.
Patience, discipline, and money management always win the day. Let the map of the markets show you the way.
