Gold have moved up from 1500 USD an ounce to 1880 USD an ounce in less than two months. Its almost 25% up-move in two months. As per my understanding of price patterns I think we are witnessing a buying climax in gold.
What is a buying climax?
As your stock or the market up moves up, at some point there will be a realization on the part of the general public that they are being left behind. They missed buying in the Trading Range, they missed buying on the way up, and now, the stock is calling attention to itself by virtue of its high price. Often this is accompanied by news reports on how well the company is doing. The Composite Operator has been waiting for this opportunity to unload his shares. He started unloading on Preliminary Supply, and now he has his best opportunity. The price action on the Buying Climax will come with wider price spread indicating the buying frenzy, and increased volume, more so then has been seen anywhere in the uptrend. The closing prices will be in the top of the price range as the price moves day by day to the top of the climax. In rare cases. Exiting on the Buying Climax is our most favorable exit strategy (See Money Management).
Second Definition
Situation where the price of a stock, commodity or other financial instrument, quickly rises but then falls. The initial rapid rise in prices is characterized by high volumes of buyers along with a price increases and can result in quick plummet in stock price due to the fact that there are no more investors willing to buy the stock at higher price.
Third Definition
The end to a rapid price rise in a security, commodity, or overall market for a type of asset, such as real estate or bonds, characterized by all of the likely buyers jumping on the bandwagon. After a buying climax, the market will fall sharply. A dramatic run-up on strong volume is a sign of a buying climax.
Look at the current chart in gold the price have moved away form the long term trend line and had accelerate and had almost move up in a straight line. I think this is a buying climax and atleast gold will make a immediate top in term.
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| Gold |
Let us look at few other buying climax.
Buying climax in nifty in 2010.
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| Nifty 2010 |
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| Nasdaq |
Buying climax in S&P500 in 2010.
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| SPX 2010 |
Buying climax in nifty in 2008.
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| Nifty 2008 |
We can see that most of the time when ever a long term trend ends it ends in a buying climax where most of the common people gets into the asset. I think we are witnessing a similar buying climax in gold. I think gold will make a high of 2000 USD an ounce before we see any correction. I would like to caution my reader against short selling gold at 2000 but definitely it would be the time exit your long position on gold.
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