Bullion Technical Analysis Dashboard
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Bullion Market Dec 2013 & Jan 2014 Prediction - INR Things to look out for in the bullion/gold market in the coming months as we observe major financial, political and economic changes in the emerging economies of Asia.
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Bullion Technical Analysis Dashboard
- 1. B U L L I O N P R E D I C T A n Te c h n i c a l a p p ro a c h t o t r a d i n g b u l l i o n m a r k e t s ! ! ! DEC 2013! BULLION DASHBOARD! MAHEK SHAH! ! ! ! ! ! ! @MAHEKMSHAH! • Active Analytic (India) Pvt Ltd I O N !
- 2. Table of Contents! ! Bullion Market Overview! i! Bullion Market! i! Gold! i! Why is ‘Gold’ the ‘Global currency’ once again?! i! Why a Technical Bullion Solution?! ii! Importance of Technical Analysis! ii! Necessity or Experiment?! ii! Input & Output! iii! List of Data Inputs Required:! iii! Filtered Data! iii! Output data:! iii! Technical Charts! 5! Short term! 5! Long term! 5! Formulas Used! 6! Moving Averages! 6! Exponential Moving Averages! 6! Active Analytic (India) Private Limited! ! "i B u l l i o n Tr a d i n g !
- 3. Bollinger Bands! 6! Crossovers! 6! Trend Line & Channels! 6! Candlestick patterns! 6! Sample Indicators Page! 7! Summary of Indicators! 7! Indicators ?! 7! Active Analytic (India) Private Limited! ! "i i B u l l i o n Tr a d i n g !
- 4. ! Active Analytic (India) Private Limited! ! "i i i B u l l i o n Tr a d i n g !
- 5. Bullion Market Overview! Bullion Market! Gold market is a multi billion dollar market with more than 40 billion dollars worth of gold being traded every day. From east to west, every country in the world considers it as a safe haven, and a prospective hedge against any uncertainty. ! Gold! World gold reserves have been depleting every year with increased production and consumption. The rate with which new gold reserves are being found is no match to the rate at which the older ones are being emptied out. Sooner or later, we will see a huge imbalance of demand-supply looming in front of us in the bullion market. ! Before we proceed any further, let’s look at some correlations which govern the gold market:! Gold is directly proportional to uncertainty.! Gold is inversely proportional to US Dollar.! Gold is directly proportional to Oil & other essential commodities.! Gold is inversely proportional to Equities & interest rates.! Gold is directly proportional to all currencies other than US dollar. (well almost)! Why is ‘Gold’ the ‘Global currency’ once again?! What do technology and gold have in common? They are both means of trade. I also believe that both are capable of spawning revolutions. You see, gold, like technology, is based on a standard: it's a standard for the monetary base. That's becoming more evident today as we see gold head to new highs, as I wrote would happen here.! As the world fiat monetary system collapses (we're witnessing this before our very eyes), that will spawn a move to more open monetary systems.! Think of the days back during mainframes and proprietary mini-computer standards. The world was ruled by technology fiefdoms and proprietary systems produced by powerhouses such as IBM in Wang Labs. The mini-computer was replaced by the industry-standard PC. Wang filed for bankruptcy. In the 1980s, and later, in the 1990s, the move to open systems accelerated as chips, networking standards, and communications opened up and could become interchangeable, spawning the creating of a massive ecosystem of suppliers. There were suddenly thousands of technology producers, rather than a handful. Technology activity throughout the world exploded. That's the power of open standards.! Now think of our governmental monetary systems: They are fiefdoms, locked down by parochial political needs, somewhat like minicomputers. Sometimes the monetary systems are furtive or fake (see Greece), other times, overleveraged (America). Often, people are afraid to trade with one another, because the fiat currencies are volatile, or hard-to-value.! Gold may seem a "barbaric relic", but it was effective during the age of the gold standard because people always knew what it was. It was an open standard. They could always trade in some dollars for gold, because there was a fixed gold exchange rate. Since the elimination of the gold standard, the financial world has become inherently more unstable because of this lack of transparency. Active Analytic! ! "1 B u l l i o n Tr a d i n g !
- 6. Why a Technical Bullion Solution?! Importance of Technical Analysis! The current world markets are experiencing massive volatility. The uncertainty pertaining to price fluctuations has prompted many investment bankers and hedgers to look into more avenues to safe guard there investments. ! Tools based on technical analysis in Risk analytics of investment, which were once considered as fancied tools, are being refined and used extensively in the current markets. More than 90% of volume in Oil market comes from the algorithmic trading tools, employed by smart fund managers of hedge funds. These algorithmic tools are simply trading on historical data and new money flow which comes into the market.! These tools not only help them in taking quick decisions, but also provide them with customized alerts, to be always alert in the extremely competitive markets. Any trader who rejects the importance of technical analysis tools without prior experimentation will eventually be cleaned out of the market.! Fundamental analysis always helps, but smart traders don't just stop there, they move to the next level. If some important news is expected in the market, one should be able to hedge his position with speed and accuracy. ! Fundamental analysis of results, supply-demand, decide the market direction and technical analysis of this move decides the price targets. ! ! Necessity or Experiment?! In today’s world, it is more of a ‘necessity’ rather than an investment experiment, like it was considered in the past. ! People today are using technical analysis extensively and one has to understand that with increasing number of markets, technical analysis champions in providing a common understanding and learning tool for the markets. ! And the current markets are slaves of democracy, the majority of market thinkers are now technical traders with fundamental views, hence the markets will tend to follow the majority rather than what was earlier conceived to be right. ! The volume traded in gold and oil markets by algorithmic tools, is itself a reflection of why one needs to upgrade himself to current industry standards.! ~~~! A visitor to Neil Bohr’s cottage once noticed a horse shoe nailed over the door.! “Surely you don’t expect that a horseshoe will bring good luck ?” asked the visitor.! “No, I don’t,”,Bohr said. “But they say it works even if you don’t believe in it.”! ~~~ Active Analytic! ! "2 B u l l i o n Tr a d i n g !
- 7. Input & Output! List of Data Inputs Required:! Data feeds are of two types:! 1.Raw Data! 2. Filtered Data! ! 1. Raw data: If one obtains raw data(tick data), necessary filtering of data is required to obtain standard technical charting data.! 2. Filtered data: Data obtained from standard tools, which refresh every given time interval. This eliminates the laborious process of filtering raw data to suit our needs.! ! Filtered Data! The filtered data for any time period essentially comprises of :! a. Open Price of Market! b. Close price of Market! c. Highest Price of Market! d. Lowest Price of Market! e. Volume traded in the market! f. Open interest in Market(daily basis)! ! Output data:! The output data to be calculated from these filtered data is:! a. Moving Averages (simple) (5,9,14,21,50,100,150,200 being standard moving averages time period)! b. Moving Averages (Exponential) (5,9,14,21,50,100,150,200 being standard moving averages time period)! c. Fibonacci Retracements! d. Volume in each time interval! e. Supports & Resistances based on the MA’s and EMA’s obtained.! f. Supports & Resistances obtained from Fibonacci calculations.! g. Volume Vs Price Change indicators. (Volume is the fuel of market)! Active Analytic! ! "3 B u l l i o n Tr a d i n g !
- 8. h. Fibonacci Projections for both bearish and bullish moves. ! i. EMA & MA ribbons! j. EMA & MA cross over indicators.! k. Parabolic SAR, especially for get out of market.! l. Bollinger Bands, defining the standard variance in prices and how one can use them to make better trading & investment decisions.! m.Wick data! n. Market Maturity Index (volume based)! o. RSI! p. MACD! q. Gann fans (time lines) advanced! ! Note: Any indicator will not give a complete buy-sell signal. Only a set of indicators can strengthen your decision.! Technical indicators are a reflection of past data and can be used to interpret the coming trend.! Standard Candle patterns that be recognized:! a. Three black crows or Three White soldiers! b. Reversal candles (4-5 standard types)! c. Bear/Bull Candles! ! Standard Classic Patterns which can be recognized:! a. Head and Shoulders! b. Bull Flag Consolidation! c. Market trend Active Analytic! ! "4 B u l l i o n Tr a d i n g !
- 9. Technical Charts! Short term! Short term charts:! a. Moving averages! b. Volume! c. Bollinger bands! d. Crossovers! e. Tick data! ! ! ! Long term! Long term charts:! a. Trend lines! b. Channels! c. Supports & Resistances (fibonacci)! d. Swing levels! ! ! ! ! ! ! ! Active Analytic! ! "5 B u l l i o n Tr a d i n g !
- 10. Formulas Used! Moving Averages! Simple moving averages for various time periods.! Exponential Moving Averages! for various time periods. ! Bollinger Bands! Using standard deviation for various time periods. ! Crossovers! Noting & alerting the clash of MA’s & EMA’s for various time periods. ! Trend Line & Channels! Automatic Trend line supports and values for various time periods. ! Candlestick patterns! for various time periods. ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! Active Analytic! ! "6 B u l l i o n Tr a d i n g !
- 11. Sample Indicators Page! Summary of Indicators! Technical Indicator Suggesting Supports Resistances Basic Indicators Volume Low, shows weakness in the commodity compared to the avg. equity volumes - - Momentum Directional but weak - - Money Flow Index Dipping recently, signs of losing sheen in the market - - MACD Has turned down sharply from a very long stable phase, showing signs of temporary market direction - - SSTO (Slow Stochastic) Has turned down, following MACD pattern religiously - - Bollinger Width Should increase drastically, the recent candle stick has opened below the bollinger band suggesting massive change in trend… Classic Indicators -2500 +1000 Bollinger Bands Tight, but will spread rapidly due to recent events… - Fibonacci Retracements! (Long term) Market has scaled lower and is at 76.4% retracement levels of short term(3 months) range, 29497! 28080! (76.4%) 30400,! 31080 30644 Chart Pattern Candle Stick (Daily Cart)! Opens with a massive gap, next few weeks (dec+jan mid) should stay in this range, then continue south… 29340 30480 Bear/Downward Trend Observed on long term chart, could go back to April 2013 lows 25600 30820 Indicators ?! While one has to become familiar with charting tools to understand what the indicators are indicating, a textual inference of the indicators becomes much easier to understand.! Supports - Resistances Long term Fibonacci Projections 26340 22078 23495 25788 28080 29300* 30380 Medium Fibonacci Term Projections Support 27820 30600 29280 28480 Resistance 28080 29497 30200** 31790 ** Current price (adjusted spot) Active Analytic! ! "7 B u l l i o n Tr a d i n g !