December 2017 Copper/Gold Scale: Another Good Exit

Pulling Down Another Winner

The IMC blog is currently running a scale trade campaign on the December 2017 copper(x2)/gold spread.  To review the strategy, read some of the prior posts on the subject.  This post is merely an update on the most recent action.

The first profitable trade in this campaign was bagged on September 15th when a position was liquidated for a profit of +$6,800.

After purchasing a December 2017 copper(x2)/gold spread at -$25,725 on August 1st, we immediately put in liquidation parameters to sell it on a close at -$20k or higher.  This finally happened on October 4th when the spread closed at -$18,695.

The trade secured a profit of +$7,030 this time around.

If the spread closes back below -$25k the blog will simply reenter a long position.

If the spread closes above -$15k the blog will sell one of the four spreads that was purchased at -$21,135 back on July 20th.  That was when we initiated the scale campaign with ‘bonus fills’ for the -$5k, -$10k, -$15k, and -$20k intervals.

Interesting Developments

As scale traders, we don’t care which happens next: a sale or a repurchase.  But as chart technicians, it is interesting to note that the recent rally has brought the December 2017 copper(x2)/gold spread right up to the declining 200-day Moving Average.


December 2017 Copper (x2) Gold spread (200-day MA) daily

The 200-day MA is a widely-watched indicator that trend followers often use as their line of delineation for which side of the market to be on.  It certainly has merit.  Many studies have backed the use of the 200-day MA for market timing.

If the December 2017 copper(x2)/gold spread can make a sustained close above the 200-day MA for the first time since May of 2015, it could turn the tide for this bear market.  If so, expect it to continue the recent trend of profitable liquidation orders.

Unlike traditional trend followers, however, a scale trader hopes that the move higher does not occur in a straight line.  Countertrend pullbacks are needed to reenter positions after profitable liquidations.  However, the market is in control of what happens next.  Not us.  All we can do is have a plan in place for how to react in either direction.

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