Sunday, June 24, 2012

Fibonacci Time and Megaphone Pattern Studies - GDX and Gold

This weekend I was doing a little reading about the megaphone pattern. By no means was I able to absorb everything I read, but I did learn enough to do a little investigating on my own. And another day I will return to what the learned experts have figured out and try to make a little more of their understandings my own.

One of the intriguing things I read was that there is often a Fibonacci relationship between the various high and low points as the megaphone pattern progresses. Being painfully familiar with the Market Vectors Gold Miner ETF (GDX) and its huge megaphone pattern I got to thinking I would start there and poke around a bit - see if there really were any Fibonacci relationships at play. Honestly, I was sure there would be so I threw out the idea of investigating the Fibonacci price measurements with something a little more exotic and unlikely - the Fibonacci time ratios.

After we take a quick look at what I found out, I have a 5 minute chart of the continuous Gold Futures chart (/GC) that I'd like to show you. As I watched it trade last Friday I became aware that it was forming a megaphone pattern. And naturally, if there are Fibonacci time ratios in a huge daily chart of GDX, I just had to find out if there were any Fibonacci time ratios in a little tiny 5 minute megaphone on gold's chart.

Finally, and thanks to a reader in London (hi Viktor!) I thought a weekly chart of the SPDR Gold Trust ETF (GLD) with a little True Strength Index (TSI) indicator musings for the upcoming week would round out this post quite nicely. I'll show you from a TSI perspective what I hope happens this week.

So, our first chart is the infamous GDX megaphone.

Click on any chart to ENLARGE

As you can see, I found a Fibonacci relationship for for nearly every significant high and low - including the breakdown location (10) and the May bottom (11).

Now if someone else would just make a few hundred of these for me to study, I could tell you all about this specimen. Any volunteers?

Next up is the gold futures (/GC) megaphone that began taking shape last Thursday and Friday, as seen on this 5 minute chart.

Out of curiosity I just took a peek at the /GC which has been trading for about 45 minutes already this Sunday evening. Sure enough, there are the new red 5 minute candles - one after the next and price apparently (predictably?) will retest the lower boundary of the megaphone. Looks to me that will take about 6 hours and price could be around 1552 or so. Then what happens?

And finally, a weekly chart of the SPDR Gold Trust ETF (GLD) with my directions for Santa Claus. An ideal BUY situation is to have as many TSI signals going for you as possible and preferably all simultaneously. Nothing is fool-proof, of course, but having a positive divergence and a trend line break and a ZERO crossover all rolled into a couple bars of trading activity is an unusual opportunity and one that I ALWAYS will take a chance on.

So for a mid-year Christmas present, I am asking for a sharp drop early in the week to take out the previous low on an intra-day basis and then a solid recovery by the end of this week or early in the following week. That's not asking too much, is it?

Have a great week and keep in touch,


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