Thursday, February 16, 2017

Mind the Gap in Gold!

With gold testing $1,240 today, I thought I should update a gold chart I had in Energy and Resources Digest on February 6. These volume gaps could trigger explosive moves higher.
(Updated chart)

You can see gold's price action through Wednesday. It recently pushed above overhead resistance.

The horizontal bars are “volume by price.” In other words, this shows the amount of volume at each $20 increment during this six-month period. The blue side of the bar is bullish volume; the yellow side of the bar is bearish volume.

You can see two huge gaps in the volume-price action. The first one leads up to $1,250. The other one peaks around $1,310.

These are areas where price moved so quickly that there was little to no volume. These form what you might call “air pockets” in price action.

You see, price has what traders call “memory” because of trades done at different prices. If there isn’t any volume at a particular price, there isn’t anyone who got stuck holding shares there. So when a stock gets back to that price again, there’s nothing to stop it in either direction.

On the way down, these air pockets can lead to big drops. On the way up, the air pockets can lead to explosive rallies.

Note: I am no longer affiliated with Oxford Club, and my views are my own.

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