Pattern recognition of the day – Gold

Gold had a perfect “Double Bottom” pricing pattern on the five minute chart today.  The second bottom failed to take out the first on lower volume, and the break in the neckline was history.  Do not be early on these patterns.  There is no such thing as a double bottom that does not take out the neckline.

Afterward, Gold continued to consolidate and formed a coiled spring formation which is an explosive pattern on the smaller degree timeframes.  The breakout from the coiled spring nailed the “Measured Rule” of both patterns quickly.  The double bottom had a target of $710 per contract, and the coiled spring had a target of $570 per contract.

The first chart is without the drawings on the 5 minute left hand side below.

 

Identifying patterns and reacting to them quickly with proper reward and risk parameters takes a tremendous amount of experience.  This type of trading on 5 minute charts with leverage I would imagine ruins most people who attempt to do it.  I am showing these as an example for how pricing patterns can be applied in all time frames.  Keep in mind the smaller the time frame the less stable the pattern, which means they are more prone to false breakouts causing whipsaw.  I do however find some patterns more reliable on different time frames and especially when they coincide with the big picture daily timeframe.

Consulting?  ScottPluschau@gmail.com

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