Wednesday, October 22, 2008

Gold and Energy Weakness - Gap Trades

The only way to capitalize on the bear market in the retirement account is trading Bear ETFs. The one caveat when trading ETFs is liquidity. So today I wanted to trade gold (HGD on TSX) and energy (HED on TSX) weakness. Gold is weak because of the inverse relationship against a strong $USD. Energy is more complex but the the higher $USD doesn't help.

HGD held the ORH as support on a closing basis and then it was just a matter of picking your spot.

In the trading account I shorted the real deal - AEM and ABX. My entry on ABX was a little pre-mature, but the stop held.



The energy play didn't work as well as gold, but still nicely profitable.

For gaps beyond the previous day's trading range, place the Fib. extension from the previous day high/low to the 15 minute ORH/L based on the the direction of the trade.

3 comments:

yr said...

Hi Jamie,
For gaps that are still within the previous day's trading range, how do u place the fib? Or u don't trade such setup at all?

On some occasions, I recall u place the fib on intraday high -low. Other than C&H pattern, what other setups uses the fib this way? Thanks

Jamie said...

YR,

Good questions. I must do a post on Fibonacci one of these days.

If a stock does not gap I place Fib. at previous days range (high/low). If it breaks below previous day range intraday extend from previous day high to previous day low.

Measured moves for chart patterns such as C&H, H&S and flags is 100% so easier to place fibs from high/low to base of pattern.

Other times I look for normal retracements after a big move - usually 38% of the move.

Other times if price starts to trade sideways after a three day run, I place Fib. retracement to cover the entire three day move.

Tyler said...

Jamie,

Please do a post of Fib one day. I am still struggling with them and have a tough time finding good info on the way you do it.

That would be great.

Thanks,
Tyler