Tutorials

When looking for camouflage entry possibilities, we should bear in mind that the opportunity manifest in a small pattern will never exceed that of the larger pattern surrounding it. This was a concern when we considered charts for February Gold and the E-Mini S&Ps. Both said “higher,” but not before corrective patterns in each had run their course. We also looked at T-Bond futures and found reason to wait for further, significant weakness before we step in to buy.

The lessons of a dull day were everywhere to be found: dueling impulse legs, tick-chart trades and microtrend analysis that said little or nothing. Still, these conditions represent the occasional condition of the real world, and so it can be instructive to ponder charts that yield almost no useful information, even when viewed with a magnifying class. What we did find was that the GLD charts provides a useful proxy for gold futures that cuts through the confusion. We settled on an upper and lower threshold that should put all anxieties over bullion’s next move to rest.

We lingered on gold’s one-minute chart, and although there were some microscopic camouflage opportunities to consider, none measured up to our expectations. Even so, this gave us a chance to delve into the psychology of gold’s price action that morning, and to ponder the factors that might cause us to either accept or reject a potential trade. Bottom line, our expectations for small abcd patterns must be aligned with the bigger picture to bring us to a trade. On days when the action is mostly sideways, there is not necessarily a reason to trade, even if it is possible to book tiny profits again and again.

Gold was pounding on resistance pivots with well-nigh irresistible force, so we considered the bigger picture offered by a jerry-rigged Tradestation monthly chart. It showed continuous-contract action going back to 2001 and gave us the wherewithal to project a 150-point rally that is nowhere to be found on the daily chart. We also looked at the E-Mini S&Ps for a camouflage opportunity, but there were none. This served to remind us that opportunities in the micro time frame are worthwhile only if they are in alignment with patterns of a larger degree.

In the Rick’s Picks chat room, thirty minutes before this tutorial session began, we homed in on December Gold as a camouflaged buying opportunity began to unfold. Although the futures had been moving tortuously sideways in a tight range for the last seven hours, this looked like the best long-entry possibility of the day; and so we “took it” (and not just hypothetically, since several in the chat room actually initiated the trade in their accounts). The trade worked out beautifully and is described in exhaustive detail in this recording. We also took a close look at the E-Mini, which, even in the context of an unpromising rally, was developing an easily tradable pattern; and at the Gold Bugs Index (HUI), which looked great for a dozen reasons.

We began the session looking at an E-Mini S&P downtrend that had fallen overnight to within two ticks of a "high-confidence" target. Our search for a camouflaged entry to add excitement to the morning proved less successful, however, since there were no clear impulse legs in sight on the lesser charts. We then considered December Gold's immediate prospects, coming away with a bearish target that subsequently went unachieved. This telegraphed the buying power that was to surface the following day. (Please note: There is electronic distortion in the background of this recording, but it can be mitigated by listening on low volume.)

During this session, we considered the underlying psychology of price patterns on various gold charts. Although we routinely use Hidden Pivots to trade, they are indispensible for understanding price action at a deeper level.. The ability to “read” stocks is a skill that some students may not even know they possess. Recall how the Karate Kid unknowingly built up his muscles painting fences and waxing cars. He didn’t know he had those muscles until he began to use them for karate. Similarly, as we become increasingly skillful at the mechanical task of finding Hidden Pivots, we subconsciously improve our ability to read the markets with discipline and detachment. This in turn can help bring us to a fundamental understanding of its basic rhythms – which is to say, its psychology.

The emphasis was heavily on camouflage, particularly when trading opportunities come from one’s ability to act quickly. Usually, camouflaged entry opportunities begin with visually subtle ABC patterns. Sometimes, however, a pattern unfolds almost too quickly to catch, making it “subtle” in another way. Such low-risk opportunities will be available only to those who are not just alert, but very quick on the draw. In this lesson, we pored over charts for gold, natural gas and the E-Mini S&Ps to find stress-free entry points with-the-trend. As is the case with all camouflage forays, the goal was to find trades that would show at least a small profit even if we were wrong about the trend.

You’ll find this session especially useful if you want to quickly review the key elements of camouflage trades. We covered the basics, which call for entering trades at Lindsay’s point ‘X’, but only when several elements unique to the Hidden Pivot Method are present, to wit: 1) an impulse leg that has surpassed at least one internal and one external peak; 2) a one-off A; 3) Single-bar a-b-c coordinates, and 4) a b-c pullback equal to at least 0.618 of k-A. We also lingered over Gold’s short- and long-term charts, concluding that 1074.50 (basis Comex December), $30 above current levels, is in-the-bag, but that any higher would portend a minimum 1134.30.