The odds are backing gold

Celebrity investor George Soros is selling gold. So is this as a signal to sell or even short gold? John C Burford isn’t so sure, and looks to the tramlines for clues.

On Wednesday, I showed gold hitting a tramline T3:


(Click on the chart for a larger version)

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And I also showed another competing down-sloping tramline set in a battle of the tramlines.

Since then, the matter has been resolved to the downside:


(Click on the chart for a larger version)

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After several tests of T3, the market moved lower to T4. Remember, I am drawing T3 and T4 equidistant off the first higher pair.

Let's just take a moment to understand what is happening here. From the trading last week, I am able, with my tramlines, to establish price targets for this week.

How did the market know where to pause in the future?

OK, the battle has been won by the up-sloping tramlines, but will they win the war?

Last time, I had these down-sloping tramlines drawn in:


(Click on the chart for a larger version)

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But although the upper red line is secure, what about the lower one?

I have taken only a short time-frame from 13 January but is this a long enough period to make a secure tramline?

Let's now go back further in time and see how the chart looks:


(Click on the chart for a larger version)

If I go back to early December my new T2 now fits the highs and lows much better, lying somewhat below its first placement. That is a crucial adjustment.

And I have a beautiful T3, passing through the two major lows. Also, T1 is even stronger, as it passes across the major December highs.

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Now I have much more confidence in these tramlines.

And now note that the market this morning has fallen to the crossing of two major tramlines (pink zone). This is major support.

A major support so what next?

Could this be a great set-up for a long trade?

We know that sentiment towards gold has turned very bearish even many long-time bulls are throwing in the towel.

Just today on Bloomberg, it is reported that George Soros, one of the most prominent celebrity traders, has reduced his holdings.

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Naturally, the less sophisticated (and less politically connected!) will read into this as a signal to sell and even short gold, believing it will go even lower.

But when a market guru of his standing is reported in the mainstream media to have taken this action, then we must suspect that the bear move is coming to at least a temporary end.

There is a well-known phenomenon that when a mainstream magazine has a cover with a blatant message such as 'BUY SHARES' you can bet that this comes after a large bull run, and that a top is nearby. It is called the 'magazine cover indicator'. It applies most glaringly in US magazines.

You rarely, if ever, see such a message after a long bear move! Usually, the message is full of dread. That is the time to buy, of course.

The odds are now stacking up in favour of at least a decent bounce.

But it may have to move towards my lower target first:


(Click on the chart for a larger version)

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The war is not yet over!

If you're a new reader, or need a reminder about some of the methods I refer to in my trades, then do have a look at my introductory videos:

The essentials of tramline trading Advanced tramline trading An introduction to Elliott wave theory Advanced trading with Elliott waves Trading with Fibonacci levels Trading with 'momentum' Putting it all together

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