Originally published by Chamber of Merchants
Out with the old, in with the new. That’s the theme for the current trading environment. For 8 years we’ve been trading under the direction of the Obama administration and for 16 odd years we’ve been trading under a predictable Federal Reserve.
Today, the situation is not so clear with regard to anticipating, what was once, the predictable behaviour of Fed and the financial environment. So we actually need to focus more on trading skills rather than predicting outcomes.
First of all, I am in cash at the moment. I exited A2 Milk Company Ltd (AX:A2M) near the high on Friday which provided a 7% return on the trade and an accumulated 29.5% return on my balance for 2017 thus far. I will re-enter A2M within the next few days in anticipation of the Feb 14th-15th report.
I have another 50 weeks left in 2017. If I remain on course and repeat the same process, the end of 2017 should close around 100%-150% balance gains. This requires my to wait for opportunities that are
#1 Bargains
#2 Opportunities
#3 Buffered against downside
The past month has renewed my respect for the difficulty of trying to profit from a small account. It is a different discipline with different risk management. It is also far more intensive on time, effort and lifestyle to profit from many trades rather than specialising and focusing. I don’t believe day trading will ever be suitable for my brain, mind or life. I respect those who profit from this practice, but for me, the Merchant method of seizing opportunities over longer periods of time is far more rewarding than the constant and monotonous barrage of trades throughout a day.
Having said that, I continue to explore my own weakness when trading forex on a small separate account and I continue to improve my discipline and introspection by broadening my exposure to the world of trading in all its forms.
In school, I used to be a real waterpolo fan. I asked a much higher-skilled waterpolo player what exercise or routines I could employ to improve my game. His reply was, “the only thing that’s good for waterpolo, is playing waterpolo.”
I didn’t exercise much after that.
So what’s good for improving trading? Is it more trading?
Yes and no.
Yes: trading is good for trading. Experience adds to your knowledge which adds to your wisdom and future decisions.
No: just trading, without a system, without discipline, without guidance, without goals will result in an account which reduces in size over time and finally bombs out, meaning you need to *insert coin to play* … again… (a pacman/space invaders reference…millenials can google it.)
So as some helpful advice, when you trade, make sure it’s a good trade. Make sure you think objectively and monitor yourself.
Trading $500 or $50,000… it’s the same fears and hopes coming from the same person… you.
So improve you.
Moving on…
Gold
Gold in US dollar terms is starting to gain traction above $1215. This has been helped especially by the rising unemployment numbers from the US. Rising unemployment makes the prospect of higher interest rates less likely and boosts the appeal of gold as an investment. Additionally, Donald Trump now wields more instant influence and power than any other president in history due to his ability (or weakness) to tweet.. things. We may balk at the novelty of his methods, however, behind the curtain he is achieving, with minimal effort, his desired outcomes. So next time you see a tweet from Donald, realise that there is a plan behind the tweet which fits neatly and orderly into a bigger picture.
Regardless (or “irregardless” according to my Singaporean colleagues), the uncertainty in the market has certainly strengthened gold’s presence above $1200. While the instantaneous and powerful jumps seen last year January have not been repeated, the slow and steady grind back to $1240-$1280 will do just fine for most gold miners’ balance sheets.
As you can see, gold is on a medium term squeeze in side a wedge or triangle formation…
So we can expect fluctuations between those to barriers, barring some disastrous event…
With inflation creeping up in the Euro zone and in the US we can safely assume that gold’s ultimate breakout will be to the upside of this triangle.
So for investment purposes, my approach would be to use any weakness in gold price as a buying opportunity. In other words, an intelligent parceling in at support level gold would be a boon to your future returns in gold. On the other hand, entering near the top of the triangle will most likely lead to being caught in the short trade which means you’d be buying high hoping for it go higher.
Remember, buy low, sell high. Even if it takes days, weeks or months. The reward will be far greater.
Dollar
The dollar bounced exactly off support bolstered by the Fibonacci support as well as the oversold RSI:
Will the bounce continue? Well that depends on the other currencies such as the euro and yen and Aussie who are all currently pushing hard up against their resistance zones. If they fail to break through then the dollar continues its bounce and gold recedes. If the currencies break through then the dollar should break below 99 which means gold has a open sky till $1280-$1320 roughly. Bad news in either Japan, UK or Australia will cause the US dollar to bounce higher… so pay attention to those counties and their economics and policies + uncertainties.
Australian Gold
The Australian gold price continues to show weakness on the weakening exchange rate:
A bounce from this trend line would be quite powerful, but breaking through can see us returning back to $1500 AUD.
In this regard, many gold miners are now sitting on higher support, so entering with a stop loss below support should ensure that no rally will be missed. I may do that very thing this coming week. Let’s see.
Think Better.