Could gold futures rally 5,000 ticks?
Hi, everyone. Josh Martinez here with tradersagency.com and welcome to this week’s idea. Today, we’re going to talk about gold futures, with a full contract, about $10 a tick and within micro contract about a dollar a tick. And we have a potential extension opportunity on gold futures that could be well over 5,000 ticks. Now, with a full contract, every ticks worth $10. It’s a 50,000 U.S. dollars trading opportunity. If you’re willing to take on the risk. If you trade a micro at a dollar a tick, is well, right around 5,000 U.S. dollars, if you’re willing to take on the risk. So what’s the research saying? Well, since basically May of 2019. It’s 2021. So ’19 ’20, ’21, three calendar years, the market has U-turned a little bit over 3000 ticks the first time, a little bit over 6,000 ticks the second time.
This just the third time in a third year.
Now the research shows that if support holds, and we believe it is, because the market did form a double bottom near the uptrend line, and the market broke the short term downtrend line, which are signs that the sellers are losing control. But, however, this is a daily timeframe, so every candlestick represents one day of trading. And we know that when the markets have a major U-turn of going down, because gold has been falling for about six, seven, eight months, and if it’s going to have a major U-turn, it’s probably going to have a little bit of a fight, right? That means the sellers are going to try to break the major uptrend and the buyer’s going to try to bring the market up. That’s going to create some consolidation and/or a channel.
So you can already see the channel starting to form.
Support, resistance, support, resistance, this high, this high, this high, if you draw a line are somewhat equal. You get a better picture, a better image, when you go to a one hour timeframe and do you see that channel starting to form? Now this one hour timer does a great job highlighting where the market likes to form U-turns on the way down or the high prices push the market down. And like to form U-turns on the way up. So market goes up, market goes up. Here is where we are right now. So how do you trade this? Well, ultimately let’s understand the big picture here of what the heck’s going on and why are we looking at different timeframes and so on and so forth. So once again, gold futures has an up channel or up trend line.
If we bring on the whiteboard and we discuss this, basically, here’s what’s happening. This is your daily timeframe, higher highs, higher lows. Oops. Let me go ahead and make it a little easier to see. Higher highs, higher lows, higher highs, higher lows, higher highs, right? And we have this up trend. So, market went up, market went up, market went up. What we’re focusing in on is this section right here. So this is your daily timeframe. On your one hour timer, every candlestick represents one hour trading, as opposed to your daily timer, every counseling represents one day. Same exact symbol, same exact price, just you get more wave movement. So if you were to zoom in on this section off of the one hour timeframe, you’re going to see a downtrend, right? And that downtrend, this trend line will be broken and the market will create an uptrend like so. What’s happening on the one hour timeframe, is you’re getting the uptrend, but it’s also creating the channel. And that channel is going to give you those boundaries to trade.
So once again, daily timeframe and uptrend line, U-turn, U-turn, U-turn. We’re going to focus in on this U-turn right here, but we’re going to go to the one hour timeframe. You go to the one hour timeframe, and there’s that channel that we were just talking about. So market hit the bottom, blue level rally to the top level. Here we are. So in trading, the question is going to be, do we want to repeat success? Most people say yes. So how do we repeat success? Well, what we like to do is we’d like to trade at known levels of U-turn. If I were to buy the market now or sell the market now, I would have a 50:50% chance of being right or wrong guessing the next short-term move.
The end goal in mind is up
If I were to buy the market now and having an exaggerated stop, the market could go against me, but eventually it should go for me if the research holds true. So think about that for a moment. Whether the market falls and then rallies or rather the market rallies, drops and the rallies, again, the end goal in mind is up. We could go up over 5,000 ticks. So strategically what we’re trying to do to minimize risk, which means we want to enter into the market and have it go our way right away, we want to trade at the areas where the market U-turns and that’s really where the skill comes in. So where does the market U-turn? Bottom blue level. Market goes up, market goes up. What does it also U-turn? Top of level. Market fell, market fell and market fell there. So if you want to buy the market longer term, we need to realistically buy above the price that pushes the market down.
Otherwise, by above top of the channel. If you want to buy the market inside the channel, we really want to buy the market at the bottom. So how do we trade? This is not ready yet. So we need to wait for the market to fall to the bottom of the channel. And then if it U-turns, buy it to the top of the channel. If the market breaks above the channel, let a low form, ideally at the backside of the old resistance level or the top of the channel from low and buy it up. Notice how we’re focusing in on buying and the direction of the trend and the direction of the trend could be up. We’re not selling. And we’re strategically only trading at areas that we can repeat success. Now, I think that’s the key here. If we were to buy or sell right now for the next short-term move, it would be very challenging to repeat success because you could have too tight of a stop because this is picking if it’s going to fall or rally.
Buy the market at a no level U-turn
Right now, my opinion it’s going to be very challenging and you really don’t have the edge. But if you can buy the market at a no level U-turn at the bottom of the channel or above the channel, those are very repeatable scenarios where realistically, we can win six out of 10, seven out 10 of those scenarios. If you just want to do more of a longer-term trade, then this is pretty simple. If you want to handle it, place your stop, realistically below this previous low. It’s going to be like a 2000 tick stop and then enjoy the ride on the way up, as long as structure holds. Most people don’t want to do that, simply because it does require a larger amount of risk and ticks, which can be nerve wrecking, especially if you are going to be rolling over gold futures frequently in these contracts.
Another scenario is to trade the ETF, which is G-O-L-D, which pretty much mirrors this. That could be an option for a buy and hold opportunity.
All right, this is Joshua Martinez. Hopefully this makes sense. That’s this week’s idea. Once again, gold futures hitting a three-year uptrend. We formed a double bottom on the daily timeframe, broke the down trend line in the buy zone, we’re starting to make higher highs and higher lows. One hour time is in an uptrend. We just completed the movement from the bottom of the channel to the top of the channel, and we’re waiting for the market to reload.
Joshua Martinez, and we’ll see you next week.