A question was ask in the comments about the following from last night's Technical Picture. "Gold might be forming a bear flag, but overall it is in the context of a larger trading range (TF). "Flags" which form within TRs are always suspect." The gold sector/index chart ($XAU) below shows that the bear flag formed above the trend line and at approximately the same price level as recent congestion.
Since the index bear flag is in a congestion zone and thus more questionable, the best approach is to find an individual gold stock that is weaker than the index. AEM got my attention. Notice the weakness of the AEM daily chart compared to the index above - bear flag is below trend line. It broke quickly and I had to wait for a pause to enter. Sweet exit at 62% Fib extension.
As the market was firming up, SRS (inverse ETF) had a great setup at the ORL and PDL. I covered at 62% extension of OR and left a lot on the table.
EDIT - Beware that longer term chart patterns in leveraged inverse ETFs (like ultra short 2x and 3x ETFs) are not as reliable and behave differently from their unleveraged counterparts. Such inverse funds track the inverse of the underlying index on any given day, but longer term relationships (on a % a basis) become skewed. The greater the volatility, the more skewed a leveraged ETF becomes with respect to its underlying (unleveraged) index.
Since the index bear flag is in a congestion zone and thus more questionable, the best approach is to find an individual gold stock that is weaker than the index. AEM got my attention. Notice the weakness of the AEM daily chart compared to the index above - bear flag is below trend line. It broke quickly and I had to wait for a pause to enter. Sweet exit at 62% Fib extension.
As the market was firming up, SRS (inverse ETF) had a great setup at the ORL and PDL. I covered at 62% extension of OR and left a lot on the table.
EDIT - Beware that longer term chart patterns in leveraged inverse ETFs (like ultra short 2x and 3x ETFs) are not as reliable and behave differently from their unleveraged counterparts. Such inverse funds track the inverse of the underlying index on any given day, but longer term relationships (on a % a basis) become skewed. The greater the volatility, the more skewed a leveraged ETF becomes with respect to its underlying (unleveraged) index.
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