My forecast was correct: gold is glistening again

Gold is trading higher once more. John C Burford draws on Elliott wave theory to set his entries and exits with pinpoint accuracy.

Today, with the help of my gold forecast from last Wednesday, I wish to show how even a basic understanding of Elliott wave theory can boost your trading performance and help you spot high-probability trend changes.

Too many traders hang on far too long to winning positions well after a change of trend. They see their profits evaporate and even turn into losses.

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This is not a fate I wish for you!

That is why Elliott wave theory can pinpoint these trade entry and exit points, sometimes with high precision, as it has in the gold charts.

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My best guess for gold


The plunge low to the $1,130 area was the final blow-off as two fifth waves completed. When you see two fifth waves, get ready for a turn-around, which could be very sharp, depending on the sentiment picture.

And the bullish sentiment was on the floor with the DSI (daily sentiment index) bullish reading at only 4% and that meant only one thing: when the rally got under steam, the short squeeze would be well and truly on and prices would rocket up.

My short-term scenario was this:


Remember, the Swiss referendum vote result was out and the market sold off heavily. The resulting rally had a pretty five-wave motive pattern on the 15-minute indicating the trend had changed to up. Trading from the long side was the correct policy, and my first major target was the $1,250 area.

A Swiss miss in the gold charts


But now I have a clear Elliott wave pattern on the daily as my best guess scenario:


The first rally to the $1,200 area is my w1. The Swiss miss is my w2 down and we are currently in w3 up.

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Identifying the current w3 was pretty easy: the moves are very strong in the upward direction and short in the downward direction. Remember, third waves are always strong and often very long.

This is what I wrote last Wednesday: "If correct, the market is in the early stages of a large third wave up. To confirm this, I need to see a rapid rise towards my upper tramline and beyond to the last major high at the $1,250 area."

Now I have a clear tramline pair and yesterday, the market powered past the upper tramline to confirm the bullish break.

We could see a pull-back for a kiss on that line, but it is certainly not required.

The market is currently within $10 of my first target.

Where can I take short-term profits?


I have now drawn in my third upper tramline and that now becomes my second major target. Naturally, if the market can spurt up quickly, it will reach my tramline at a higher level than if it takes its time to get there.

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With a basic knowledge of Elliott wave theoryand my very simple tramline method, I have followed the twists and turns almost to the pip.



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