Chart 1: Precious Metals are between a rock and hard place. A big move is coming!
Source: Short Side of Long
Central Fund of Canada (ARCA:CEF), which does a great job representing prices of gold and silver, finds itself in an interesting position from a technical perspective. There is clear support protecting the downside and just as clear resistance (in the form of the downtrend line, which started in September 2012), keeping prices in a pattern of lower highs.
However, we now find ourselves in a major pressure cooker - a decision point in the apex of a triangle compression. Either the bulls or the bears must now win. I doubt the price and the volatility will stay this low indefinitely.
Which way will it go? I’m not sure. But whichever way it breaks I will trade and update the newsletter with my position whenever a break in either direction occurs. Some wise words for the traders out there:
In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be. The thing to do is to watch the market, read the tape to determine the limits of the get nowhere prices, and make up your mind that you will not take an interest until the prices breaks through the limit in either direction.
Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend. Don’t take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don’t be an impatient trader.