This week's blog post will begin with some interesting, from a price action trading perspective, situations. I am talking about Gold and Silver.
Here are the charts for both instruments.
First is Gold
You've probably noticed that in both instruments accumulation is picking up and it is stronger than the chart itself. Especially in Gold. This is bullish. Unfortunately, this is the only thing that builds the setup, outside of the price action (at least what I could see) so let's focus on the combinations the chart is presenting us.
Again look at the above charts. The price action looks very similar. Both are making higher lows. In both of them, we have a Long Body down bar on Thursday and an inside down bars on Friday
The only difference is in the shape of the last bar. Since it is the last bar, it is the most important because it contains the latest information.
Silver's last daily bar was a Long Nose down bar. In Gold, the situation is very rare, because the inside down bar is an Equality bar.
I've backtested those patterns (without getting too much into the details) and here are the results.
As you can see the backtest is showing a good level of bullishness in both instruments. Now the question is which one?
The EQ bars have higher probabilities of reversing on the next day (above 80% according to The Talking Chart book). Now, combine this with a stronger accumulation in Gold and I think that Gold should perform better here. Of course, this is without counting the upcoming price action which might favour one or the other instrument and show which one will be the strongest.
Anyway, I'll be looking for being long in those instruments.
Seasonally speaking (blue line on the chart), we are in one of the best periods. Cycles (yellow arc) also support the bulls. OBV (the pane below the chart) is showing that the accumulation is picking up.
So far so good. Now, to the price action. Large down LB bar followed by two consecutive inside bars. Then an up Long Tail, which clears everything below the lows of the last three days and after that a down Long Nose on Friday.
Looks bullish enough. Let's see if it will break to new all-time highs.
Founder of Piece of Trading
Trades mentioned here are either taken or will be taken by the author if the right conditions appear. They are NOT recommendations nor any of this constitute investment advice. Please read the Risk Disclaimer
Seasonal indicators courtesy of Larry Williams, ireallytrade.com. Charts made with TradeStation®. tradestation.com
Get it today!