KNOW YOUR OPPONENT
Aside from myself, a few well respected traders/technicians came out last week to discuss the price action in Gold.
To summarize, those opinions were similar to mine stating that the only folks buying last week were of the retail variety. When you sense this crowd, or can see their footprints in the market…prepare to take their money.
I’ve stated this about the overall market, and the same can be applied to any instrument….when the pain trade becomes ‘lower’ it is because the market has left people stranded above. We discussed this at length last year, referencing the island of longs in both Gold and Bonds around this time last year. Today, prices gapped beneath all prices printed last week. In other words, late longs are now trapped – as I suggested in the gruesome comment exchanges last week.
As discussed in After Hours with Option Addict last week, I used the enthusiasm of Gold bulls to also initiate a LT position in $TBT and a few trades in a few banks. The timing of last week I felt was significant – and was why I built these positions leading into last week.
I’m still a little underwater in my $DGLD, but that happens when you build a position into a breakout or breakdown. I like my chances here.