Weekend Report... Chartology of the Full HUI Bull

By: Rambus Chartology | Tue, Oct 9, 2012
Print Email

Charting is one of many disciplines used to follow the markets. You have Elliot wave guys that base the market movements on wave counts and cycle analyst that look at the different cycles from short to long term. A good Elliot Wave analysts can look at a chart and start counting waves based on years of experience. An experienced cycle guy will understand when a cycle is left or right translated whereas the inexperienced cycle person will say, because the price action didn't turn on a dime when he expected it to, cycles are worthless to follow. With any discipline that one uses, it takes alot of hard work and time to finally become some what proficient in understanding what the markets are throwing at them. There is no holy grail when it comes to the markets but if one takes the time and makes an honest effort to understand one of the disciplines they can get the odds in their favor to make a trading decision base on something other than pure emotions.

For me personally, charting the markets is the way I interrupt market movements based on chart patterns and understanding how support and resistance works. In the late 70s an old timer gave me a book by Edwards and Magee, Technical Analysis of Stock Trends, that showed all these neat chart patterns but it bored him to tears. I couldn't put the book down. I read it over and over again until I understood exactly what was being taught. That was the book learning part of charting. Then you have the "real time" work to put in, following the markets on a day to day basis and learning through trial and error and mistakes, that finally, if one sticks with it, things start to make sense. There is no better teacher than real time experience.

In this weekend report I would like to show you the chartology of the HUI based on my own personal experiences with charting over the years. We'll look at some chart patterns based on bar charts and some line charts in different time frames. I want to focus in on the big one plus year top that the HUI craved out mostly in 2011. As you can see on the chart below the big top was made up of two different chart patterns. The first pattern to observe is the 11 point diamond reversal pattern. The red numbers shows you the 11 complete reversal points, which an odd number of reversal points, makes a reversal pattern. Just a quick note. A double bottom or top is a three point reversal pattern. A H&S top or bottom is a 5 point reversal pattern. The diamond on the chart below is an eleven point reversal pattern. You can have five, seven or more odd numbered reversal points in a triangle or rectangle that will reverse the trend. An even number of reversal point such as four, six, eight or more will end up being a consolidation pattern or continuation pattern.

$HUI (Gold Bugs Index - AMEX) INDX
Larger Image

As you can see on the chart above there is also a beautiful nine point H&S reversal pattern, not numbered. The diamond pattern actually gave one an earlier warning that the trend was about to reverse back down with the breakout gap just below point number 11. Note the quick backtest to the blue rail and then the fall away move down to the big neckline where a small rectangle formed, right on the neckline. As the little red rectangle was only a four point pattern it had to be classified as a continuation pattern to the downside. I know alot of gold bugs were not happy with my call to go to cash but the evidence was so overwhelming. I had no choice in the matter.

Next I want to show you the same one year top using a daily line chart. A line chart just takes the closing daily price and adds it to the next days closing price connected by a line. On the chart below you can see how beautiful and symmetrical the H&S top looks. On the line chart the little red rectangle formed just below the neckline, which was now acting as resistance, followed by one more small consolidation pattern, the four point bearish falling flag. The big H&S top hit its measured move price objective down at 370. That satisfied the minimum price objective.

$HUI (Gold Bugs Index - AMEX) INDX
Larger Image

Lets look at one more chart of the big H&S top, on a weekly line chart, before we move on to our most recent pattern, the double bottom. Sometimes a line chart can takeout some of the noise a bar chart might show by taking out some of the big interday price swings that can get wild sometimes. Double bottoms and double tops, on a line chart, often stick out like a sore thumb whereas on a bar chart they might be harder to spot. Anyway you can view the neckline as a support and resistance rail. Above is support and below is resistance. Note the other two H&S patterns on the chart below.

$HUI (Gold Bugs Index - AMEX) INDX
Larger Image

We now know that the big H&S pattern was a reversal pattern to the downside which met its downside price objective at 370. Now, in order to get a reversal of trend we need to see some type of reversal pattern form at the lows. The two patterns I always look for is an inverse H&S bottom or a double bottom. In our current situation the HUI has put in a beautiful double bottom reversal pattern. A double bottom isn't complete until the double bottom hump is taken out to the upside. You can see on the chart below the double bottom hump was actually a small double top that separated the left and right bottoms. This chart is also a good study in how support and resistance works. If you follow the price action up from the right bottom, note how cleanly the HUI moved up and through the apex of the five point bearish falling wedge, green circle. Keep in mind trendlines on a chart pattern are nothing more than a support or resistance rail. Chart patterns shows you the battle that is going on between the bulls and the bears until one side wins out. The way the price action moved through the apex of the falling wedge tells me the HUI wants to go higher as it's not wasting much energy getting above the two blue trendlines, at the apex, which should have been some pretty serious overhead resistance. The two small red horizontal rails shows where we should see some kind of consolidation pattern form if indeed the bottom is in place.

$HUI (Gold Bugs Index - AMEX) INDX
Larger Image

The next chart shows the downtrend channel that is made up of the five point bearish falling wedge and our current double bottom. Again note how cleanly the price action was when the HUI took out the overhead resistance, green circle.

$HUI (Gold Bugs Index - AMEX) INDX
Larger Image

Alot of times when a stock makes a double bottom there will be a strong decline going into the first bottom. After the second bottom is completed a move of equal magnitude, in the opposite direction can take place, I call this reverse symmetry. The chart below shows our double bottom with the reverse symmetry taking place shown by the black arrows.The double bottom has a price objective up to the 550 area

$HUI (Gold Bugs Index - AMEX) INDX
Larger Image

I want to show you one last chart that I have never posted. Until our recent double bottom became apparent I wasn't able to draw in the bottom trendline. Most chartists will view this chart as bearish but I can assure you if it breaks out through the top blue rail it will be very bullish for the HUI. The chart below shows the whole bull market with the big complex inverse H&S base and the smaller red consolidation patterns that formed up until the 2008 top which is the start of this pattern. With the completion of our recent double bottom we now have four reversal points in play. The first reversal point is the 2008 H&S top. The crash low inverse H&S bottom that I showed you on the weekly line chart is reversal point number two. The big H&S top that we discussed at length at the beginning of this article is reversal point number three and our recent double bottom is reversal point number four. The HUI still has alot of work to do yet to get up to the top blue rail of the bullish rising wedge. How we interact with the top rail will give us some major clues if this potential blue bullish rising wedge will be a halfway pattern to the upside. The potential bullish rising wedge is telling us that the HUI has been basically consolidating since the 2008 H&S top was made.

$HUI (Gold Bugs Index - AMEX) INDX
Larger Image

If you think a rising wedge is always a bear pattern I would like to show you one we've been following at Rambus Chartology that is made up of two small red individual chart patterns.

SAND (Sandstorm Gold Ltd.) AMEX
Larger Image

So there you have it from this chartists perspective, The Chartology of the HUI bull market to date. All the best... Rambus

 


 

Rambus Chartology

Author: Rambus Chartology

Rambus
Rambus Chartology

Rambus Chartology is Primarily a Goldbug TA Site where you can watch Rambus follow the markets on a daily basis and learn a great deal of Hands on Chartology from Rambus Tutorials and Question and Answers.

Most Members are Staunch Goldbugs who have seen Rambus in action from the 2007 to 2008 period at www.goldtent.org and now Here at Rambus Chartology since early 2012.

To review his Work and incredible calls from the 2007-2008 period click on the top right sidebar in the "Wizard of Rambus” ..."What If !!" Post

To Follow Rambus Unique Unbiased Chart Work and participate in a Chartology Form with questions and answeres and learn the Art and Science and Mindset of a Pro Trader please Join us by subscribing monthly at www.rambus1.com

You will find Rambus to be a calm humble down home country tutor with an incredible repitoir of all the TA based protocols tempered with his own one of a kind style...simply put...He wants to keep his subscribers on the right side of these crazy volatile and downright dangerous markets

Disclaimer

IMPORTANT RISK DISCLOSURE This site has been prepared solely for information purposes, and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. The information presented in this site is for general information purposes only. Although every attempt has been made to assure accuracy, we assume no responsibility for errors or omissions. Examples are provided for illustrative purposes only and should not be construed as investment advice or strategy. The information presented herein has not been designed to meet the rigorous standards set by the Commodity Futures Trading Commission for disclosure statements concerning the risks involved in trading futures or options on futures. That disclosure statement must be provided to you by your broker. The materials in this site do not attempt to describe the risks to investors that may be associated with the way trading is conducted in any particular options market or in any market for an underlying or related interest. In the preparation of this site, every effort has been made to offer the most current, correct and clearly expressed information possible. Nonetheless, inadvertent errors can occur and applicable laws, rules, and regulations often change. Further, the information contained herein is intended to afford general guidelines on matters of interest, and to serve solely as an introduction to our financial services. Accordingly, the information in this site is not intended to serve as legal, accounting, or tax advice. Users are encouraged to consult with professional advisors for advice concerning specific matters before making any decision impacting on these matters. This site disclaims any responsibility for losses incurred for market positions taken by members or clients in their individual cases, or for any misunderstanding on the part of any users of this website. This site shall not be liable for any indirect incidental, special or consequential damages, and in no event will this site be held liable for any of the products or services offered through this website. By accessing or otherwise using this website, you are deemed to have read, understood and accepted this disclaimer.

Copyright © 2012-2014 Rambus

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/