In my book Tramline Trading I reveal my trading diary entry for a successful campaign I had in gold which stretched over a four month period in early 2014. Many of my swing trades were based on a reading of the Elliott Waves together with my tramline analysis.
The concept of tramlines is an extension of the familiar trendlines which I have been developing in recent years.Many markets trade at certain periods between two parallel lines; the upper line joining the highs and the lower line connecting the lows. This is what I call a tramline. The upper line represents resistance to rallies and the lower line is a line of support to declines.
Can I apply the same methods to correctly forecast the gold market today?
Here is the daily chart:
I have labelled the Elliott Waves and since July 2013, the market has carved out a fourth wave in the shape of a triangle. In recent days, the market has been testing the B-D support line, which is my line in the sand for gold bulls. A decisive break below this line would spell curtains for the bullish cause.
But the market is currently bouncing off this support and a rally appears underway.
Here is the hourly chart:
My tramlines are clear and my next target is the upper tramline. What happens after that – that is the question. But I had a long trade entry on the centre tramline break and now my protective stop is moved to break-even. No matter what the market decides to do, my worst case scenario is a wash trade. A better case scenario is for the market to rally up to the $1300 area – and then perhaps extend.