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Gold's Double Top at 1200

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  • Gold's Double Top at 1200

    Icm63 suggests the possibility of a double top in gold at 1200 here: http://www.itulip.com/forums/showthr...60145#poststop

    Here's the gold chart:

    http://http://finance.yahoo.com/echarts?s=gld#chart2:symbol=gld;range=1y;indicator =volume;charttype=line;crosshair=on;ohlcvalues=0;l ogscale=off

    So, what is a double top? Definition found here:

    http://www.trending123.com/patterns/double_top.html

    1. Uptrend Preceding Stock Chart


    As mentioned previously, the double top is a reversal formation. It begins with prices in an uptrend. Analysts focus on specific characteristics of that uptrend when searching for a valid double top. The trend upwards should be fairly long and healthy. Bulkowski maintains that an investor will want to see prices trending up over the short to intermediate term - approximately 3 to 6 months. Further, he states that "the price trend should not be a retrace in an extended decline but generally has a stair-step appearance. Schabacker confirms this approach, explaining that if the stock has been in a long, healthy uptrend, the double top is more likely to develop into a reversal. If the uptrend is short, the double top may not hold and the uptrend will continue.


    2. Time between Tops

    Analysts pay close attention to the "size" of the pattern - the duration of the interval between the two tops. Generally, the longer the time between the two tops, the more important the pattern as a good reversal. Schabacker warns investors off of a pattern where only a few days intervene between the two peaks.Analysts suggest that investors should look for patterns where at least one month elapses between the peaks. It is not unusual for a few months to pass between the dates of the two tops. Murphy mentions that these patterns can span several years.


    On the other hand, Yager notes that patterns that are too long may be unmanageable, and she looks for tighter, shorter patterns. Yager believes that shorter patterns are viable as long as you can see the volume in the right top forming.


    3. Decline from First Top


    According to Schabacker, this element is even more significant to the validity of a double top than volume. He argues the decline in price that occurs between the two peaks should be consequential, amounting to approximately 20% of the price. In fact, he states that it could even be more than that but should not be much less.Other analysts are not so definite or demanding concerning the price decline. For some, including Yager, a decline of at least 10% is adequate. All agree, however, that the deeper the trough between the two tops, the better the performance of the pattern. 4. Volume
    As mentioned previously, volume tends to be heaviest during the first peak, lighter on the second. It is common to see volume pick up again at the time of breakout.


    5. Decisive Breakout


    According to Murphy, the technical odds usually favor the continuation of the present trend.This means that it is perfectly normal market action for prices on an uptrend to peak at a resistance level a couple of times, retreat, and then resume that uptrend. It is a challenge for the analyst to determine whether the decline from a peak is the indication of the development of a valid double top or simply a temporary setback in the progression of a continuing uptrend.Analysts, therefore, advise cautious investors to wait for the price to fall back and break through the confirmation point before relying on the validity of the pattern. Many experts maintain that an investor should wait for a decisive breakout, confirmed by high volume. Others, like Bulkowski, are not so reliant on high volume at the time of breakout but do agree that the higher the volume at the time of breakout, the further the decline in prices that the pattern will register.


    6. Pullback after Breakout


    A pullback after the breakout is usual for a double top. Bulkowski argues that the higher the volume on the breakout, the higher the likelihood of a pullback. "When everyone sells their shares soon after a breakout, what is left is an unbalance of buying demand (since the sellers have all sold), so the price rises and pulls back to the confirmation point."


    As you can see, the criteria for a double top has been met. This would appear to be a good call. What do you think?
    Last edited by dummass; 05-10-10, 08:03 AM.

  • #2
    Re: Gold's Double Top at 1200

    Can someone fix the link to the chart? It would be nice if the chart could be viewed on the thread, if possible. Thanks

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    • #3
      Re: Gold's Double Top at 1200

      Originally posted by dummass View Post
      Can someone fix the link to the chart? It would be nice if the chart could be viewed on the thread, if possible. Thanks
      You can edit your own post, but the rest of us ordinary members can't. You can fix that link by removing the "http//".

      Change:
      http://http//finance.yahoo.com/echarts?s=gld#chart2:symbol=gld;range=1y;indicator =volume;charttype=line;crosshair=on;ohlcvalues=0;l ogscale=off
      to:
      http://finance.yahoo.com/echarts?s=gld#chart2:symbol=gld;range=1y;indicator =volume;charttype=line;crosshair=on;ohlcvalues=0;l ogscale=off
      Here's the chart of GLD as a static image
      Most folks are good; a few aren't.

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      • #4
        Re: Gold's Double Top at 1200

        Thank you, humble cow. The link is now working, but I like your static image better.

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        • #5
          Re: Gold's Double Top at 1200

          You won't know its a double top until price moves up or down, at this point a DT is just a guess.

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          • #6
            Re: Gold's Double Top at 1200

            Originally posted by dummass View Post
            Thank you, humble cow. The link is now working, but I like your static image better.
            You're quite welcome, good sir.
            Most folks are good; a few aren't.

            Comment


            • #7
              Re: Gold's Double Top at 1200

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              • #8
                Re: Gold's Double Top at 1200

                Originally posted by chr5648 View Post
                You won't know its a double top until price moves up or down, at this point a DT is just a guess.
                The idea of this exercise is to analyze the possibility of a double top, before gold hits 1060 and confirms the hypothesis. So far, we know that the second advance to 1200 happened with lower volume (see chart of GLD above). Gold has also been dropping this morning. Is this an advanced warning?

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                • #9
                  Re: Gold's Double Top at 1200

                  The bulls perspective courtesy of Clive Maund 5-9-10

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                  • #10
                    Re: Gold's Double Top at 1200

                    Originally posted by dummass View Post
                    The idea of this exercise is to analyze the possibility of a double top, before gold hits 1060 and confirms the hypothesis. So far, we know that the second advance to 1200 happened with lower volume (see chart of GLD above). Gold has also been dropping this morning. Is this an advanced warning?
                    I don't care. I already sold some of my gold mining shares and plan to sell more together with some mining share calls and SLV calls ( I sold my GLD calls earlier and missed reentry point).

                    If gold drops, I will wait, then buy back some of the stuff I sold. If it goes higher, I will sell more. Booooriiiing...

                    FWIW, I am expecting the usual annual gold takedown sometime between now and mid-July.
                    Last edited by medved; 05-10-10, 11:32 PM.
                    медведь

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                    • #11
                      Re: Gold's Double Top at 1200

                      Try a triple top. I got the first two.

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                      • #12
                        Re: Gold's Double Top at 1200

                        Originally posted by medved View Post
                        I don't care. I already sold some of my gold mining shares and plan to sell more together with some mining share calls and SLV calls ( I sold my GLD calls earlier and missed reentry point).

                        If gold drops, I will wait, then buy back some of the stuff I sold. If it goes higher, I will sell more. Booooriiiing...

                        FWIW, I am expecting the usual annual gold takedown sometime between now and mid-July.
                        I want to thank you for this post and another you made, showing a curve fit of gold price. You seem to share the philosophy of a certain retired investment banker I subscribe to. The main lesson: buy weakness and sell strength.

                        Comment


                        • #13
                          Re: Gold's Double Top at 1200

                          It's already blown past any possibility of being a double top in some other currencies such as the Aussie, Kiwi, Pound, Euro and Yen. That's the interesting thing about TA and gold - it depends which currency you are looking at it in.

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                          • #14
                            Re: Gold's Double Top at 1200

                            Maybe that's because TA is little more than Tealeaves Analysis -- just saying.

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                            • #15
                              Re: Gold's Double Top at 1200

                              Originally posted by Chomsky View Post
                              Maybe that's because TA is little more than Tealeaves Analysis -- just saying.
                              What is this? You mean you can't predict the future price of a commodity by drawing straight lines over a squiggly line? No wonder i've been losing so much money in the market! ;)

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