The price of gold and the gold miners’ index are well worth watching. At this time the charts are pointing to lower prices in the coming days or weeks. Options trading investors take note.

As you can see from the chart gold has formed a bear flag with declining volume and the price has drifted up into a resistance level. This combination typically leads to lower prices.

International fears are rising and inflation has started so I am little weary of shorting gold. But I have learned that trading on fundamentals and news clips seen on TV is not a reason to pass on a setup if one forms in the coming days. The only thing that pays in the stock market is when the price action goes in your favor. This is why I focus on price, volume and momentum while avoiding what others are saying elsewhere. Trading is a numbers game and I put my money on the table when the odds are clearly favoring one direction.

Gold Futures

The Market Vectors Gold Miners ETF (NYSE: GDX) is forming much of the same pattern as gold bullion but this week the chart actually put in a possible reversal candle. If this is correct then we should see gold and most likely silver follow suit by moving lower and possibly even start a correction.

Gold Miners (NYSE: GDX)

Gold Swing Trading Conclusion:

In short, gold stocks sold off strong Wednesday while both gold and silver closed only slightly lower. When this happens near a resistance zone, with a bearish price and volume patterns I start to look for a shorting opportunity. It has yet to happen and I’m not going to jump the gun, but I am waiting for the right opportunity to take advantage of these trading instruments.

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