Transcript Document

How to Use Technical Analysis
to Maximize Your Gains
Presented by Peter Krauth
Moving Averages
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Moving Average: average of security’s price over set period or time, measures momentum
50-day moving average: Blue Line, action of last two months (last 50 trading days)
200-day moving average: Red Line, action of last nine months (last 200 trading days)
Golden Cross (bullish): short-term moving average breaks ABOVE long-term moving average (mid-September), but that was a
late indicator, Gold had reached $1,775 (upward price action was very fast)
Bearish Cross: short term moving average crosses BELOW long-term moving average (mid-April), this was better predictive
timing than the Bullish Cross in September
On Dec. 13, Gold dropped to $1,688, which was a good level to add
We could still see Gold drop to near $1,650, and the 200-day moving average would help support it
One strategy traders use is to buy the FIRST HALF of a position once the price crosses 50-day moving average on upside, then
the SECOND HALF of a position when the price crosses 200-day moving average on upside
Higher Lows, Higher Highs
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Southern Copper Corp. (NYSE:SCCO) bottomed in mid-May around $26, and started a reversal upward
Started a series of higher lows, and higher highs (late May onward), finding support at the 50-day moving average
line
This is a bullish development that projects an ongoing climb
When SCCO pushed above previous resistance around $30 (early August), this can be considered a breakout, since
it had peaked there several times before (late Feb., early May, three times in July)
Right now, SCCO could drop to $35 and remain above its support at the 50-day moving average
If we saw a pullback to $35, and it stayed above that level, that would make a good entry point
Support and Resistance
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Support: level at which price is supported from falling lower: BLUE line
Resistance: level at which price resists pushing higher: RED line
Key because when have a “break out” below or above these levels, especially on strong volume (see September),
can signal a trend change
Sometimes upper Resistance line can become new (lower) Support line: BULLISH SIGN
For example, if we begin to see Aurcana Corp. (TSX.V:AUN) consistently trade above $1.05, could become new
Support
However, we also see a potentially new support line forming now around $1.00 (see GREEN Line); each time it
dips below that, it tends to pop back up quickly.
Buying at or just below $1.00 is looking like a good level to buy or accumulate Aurcana
Bullish Flag (within uptrend)
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Gold peaked in Sept. 2011, began consolidating in Bullish Flag pattern (within an uptrend)
Formed a series of lower highs, but found SUPPORT at the $1,550 level
BULLISH development, forecasting a likely breakout once triangle nears its formation (right hand side)
We got that breakout in mid-August, which is also when the strong Seasonal Trend starts each year for Gold
Gold finally “popped” above $1,625 to run up to $1,675 (mid-August), then upward again to $1,775 (by early Oct.)
Can see potentially a new Bullish Flag forming since early Oct.
If Gold can push above $1,725 and maintain that, it could signal an upside breakout and new leg up, likely to happen within weeks
Buying or Accumulating gold, use the Sprott Gold Trust ETF (NYSE:PHYS), which looks good when gold is trading between $1,650 and $1,700
Rising Wedge
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Rising Wedge is a Bearish technical formation
IMPORTANT: Top Line and Bottom Lines are both RISING
Microsoft exhibited this type of behavior from late May into late September
We need to watch for a break of the lower line in the forming triangle
Microsoft Corp.’s (NasdaqGS:MSFT) 200-day moving average appears to have provided support within that wedge
Once the support was broken on downside, MSFT bounced just above 200-day moving average, but couldn’t maintain that level, and
began trading Below the 50-day moving average, a clear downward trend
• Once MSFT price went below the 50-day moving average and bottom of wedge, traders would have been looking to start selling
• Once MSFT price went below the 200-day moving average, traders would have intensified selling
• Drops below the 50-day moving average, the bottom of a rising wedge, or the 200-day moving average are all levels traders use to
consider selling, and aggressive traders may even want to short the security
Falling Wedge
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Falling Wedge is a Bullish Technical formation
IMPORTANT: Top Line and Bottom Lines are both DECLINING
Fortuna Silver Mines Inc. (NYSE:FSM) is exhibiting this type of behavior since a few months
We need to watch for a break of the upper line in the Falling Wedge
A sustained push above $4.60 level, where the upper line currently ends, would be a bullish signal
From that point, the next target would likely be the 50-day moving average at $4.90
If FSM could push above $4.90, and hold that level, the next target would likely be around $5.50, the previous significant high of late
Oct., then late Nov.
• A push above the upper line of the Falling Wedge would be a significant move that would likely excite traders
• From there, a push above the 50-day moving average, the 200-day moving average, and previous significant highs are all “trigger
points” which would help to confirm a new uptrend, and get traders increasingly excited.
Golden Staircase
• Golden Staircase is a term I coined a few years ago, as I was studying the long term price chart for gold, it struck me
• I noticed there are “bursts” to new highs, followed by long consolidations, then after enough time digesting, those highs form a new “STEP” in a
“GOLDEN STAIRCASE”
• Once that STEP is later surpassed, it typically is no longer breached to the downside
• This is not a hard and fast rule, notice peak in Dec. 2008 (blue line), price was surpassed in summer of 2009, but then dropped below the Dec. 2008
peak by fall of 2009
• The same thing happened with the next peak in Dec. 2009 (2nd blue line), which was surpassed in the spring of 2010, this time a temporary drop
below, and a turnaround and surge upward once again
• Right now, we’re in the formation of a new Large Step, top is at $1,900, once that’s surpassed good chance will hold, expect that will happen by next
spring, perhaps with a surge to the $2,000 level. If that plays out, we may be looking at an 18% gain in gold from here, more for PM stocks! My target
for 2013 is $2,200 or 30% higher from here!
SUMMARY
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Moving Averages: Help define short and medium term price trend, 50-day & 200-day are most popular
• Look for Golden Cross and Bearish Cross
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Higher Lows, Higher Highs: Strong bullish signal. Look for support areas, like moving averages, as buy
levels
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Support and Resistance: Horizontal lines which “contain” a price for awhile. Look for breaks below
Support and above Resistance for a change in trend, can signal time to Sell or Buy
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Bullish Flag: Formation which portends an approaching breakout as price nears right hand “tip” of flag.
If flag is within an uptrend, breakout is likely upward
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Rising Wedge: Bearish signal, look for breakdown below bottom of wedge, moving averages may be key
levels
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Falling Wedge: Bullish signal, look for breakout above top of wedge, moving averages may be key levels
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Golden Staircase: My own term to describe the price action of gold since its secular bull started back in
2001.
• Look for previous peak to become the next “step” in the chart, likely to become Support
level.