Here’s an Elliott Wave look at gold and silver, which have become very oversold with bearish sentiment and technical indicators that are extreme…
Short Term Update:
The good news: It is possible that all of wave *c* and .ii. are complete at the 1205.10 low and wave .ii. higher has now started.
The bad news: We will need to see how gold trades in the days ahead, but for now we are still thinking that one more drop to at least the 1204.00 low appears likely.
Gold is very oversold and at record extremes with various other technical indicators.
This is important: Elliott Wave Theory (EWT) suggests that at the end of corrective wave .ii.’s that the market psychology is very bearish (in a bull market)… even more bearish then at the start of a move higher. I believe we have that sentiment now. Investors should not be frustrated but instead use this buying opportunity to their advantage.
Upon completion of wave .ii. we expect to see gold trade above very strong resistance at the 1360.00/1370.00 level, and likely into the 1500.00 area.
Long Term Update:
As investor can see on this weekly gold chart, wave .ii. has become a double 3 wave corrective pattern, and that is nearing completion.
Longer term, our first and second projections for the end of wave -iii-, as shown on the weekly gold chart, are:
Trading Recommendation: Go long gold now. Use put options as stops. Aggressive traders should consider adding to long positions here.
Active Positions: We are long, with put options for risk management!
Short Term Update:
It could now be possible that wave .ii. in silver is now complete at the 15.14 low, and that wave .iii. high could have now begun. We will give this market a few more days to confirm this observation.
A rally and close above the 15.64 low would be very good sign that the fortunes of silver have started to turn to the upside.
Like gold, silver has many indicators at extreme/record levels, which is indicating that a reversal to the upside is likely imminent.
If it materializes as our counts project, the expected sharp rally in wave .iii. would see silver trade well above major resistance at the 18.30/18.50 level.
Once wave .i. ends we expect a very sharp rally in wave .iii., to be the next major move in this market.
In the very long term we completed all of wave III at 49.00 in 1980 and all of wave IV at 3.55 in 1993. We are now working on wave V and within wave V we have the following count;
Wave 1 = 49.82;
Wave 2 = 13.67. Note that wave 2 retraced 78.6% of the entire wave 1 rally.
Wave 3: In play now.
Trading Recommendation: Go long silver. Use a put option as a stop. Aggressive traders should consider adding to long positions here.
Active Positions: We are long, with puts as stops!
Free Offer For Website Readers: Send me an email to [email protected]tainewave.com and I’ll send you our “IS THIS IS THE GDX LOW?” report. I highlight the key short-term wave counts for GDX, and what I’m looking for to signal the imminent rally will have legs!
Captain Ewave & Crew!
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