Mystery Chart – Solved

Yesterday, I posted a chart with no names or numbers – if you haven’t already seen it, click here before you read further. you were asked to answer three questions:

1) Is this security a buy or a sell?

2) Which security is it?

3) Are the 88% buyers or sellers?

It was great to read everyone’s views – and many thanks to all who contributed.

The answers are:

1) Up to individual traders to decide. I’m bearish on a fundamental view, but agree with those who pointed out that the chart displays encouraging signs for both bulls and bears, or is at least neutral.

2) GOLD in US dollars. Other suggestions included silver, copper, AUD/USD, EUR/USD, BHP, Rio. Congratulations to those who identified it correctly. My favourite came from Iain, and reflected the traders’ journey:

“It is a chart of my confidence in trading shares. Initially, a few decent trades inflated my confidence way past my knowledge base. Upon learning more, only then did I realise how little I knew.  At this point I started second guessing myself and as a consequence traded sideways. I expect to flatline sometime soon. I am currently thinking about buying which would suggest that 88% of others will do the opposite.”

3) 88% of CMC accounts with a position in gold are LONG. Here’s a screenshot:

20130321 sent

(This is the new Client Sentiment indicator – as you can see above, you’ll find it in the same window as the charts and other security information, on the “Overview” tab).

This positioning was the inspiration for the post. I’m not sure why so many are bullish on gold – and the majority who guessed that 88% are short may agree.

The most complete and accurate answers came from jpietersz, Leo, william small, Ephraim Sella and the Captain. Congratulations to all the winners, and thanks again to all who participated.

 

About michaelmccarthycmc

Chief Market Strategist - CMC Markets and Stockbroking Regular on ABC, BBC, Bloomberg, Channel TEN, CNBC, SBS and SKY
This entry was posted in Commodity, Gold, Market, Trading and tagged , , , . Bookmark the permalink.

9 Responses to Mystery Chart – Solved

  1. ” I’m not sure why so many are bullish on gold”

    The long-term fundamentals for holding gold as an uncertainty and inflation hedge are still there, especially with the recent Cyprus fiasco. From a technical perspective, gold is at the bottom of its weekly range and I would stay long until there’s a breakout. I’ve learned the hard way to respect the ranges.

  2. Barry Seeger says:

    Good exercise Michael. One possible cause for the extreme long weighting is the constant barrage of media telling us that gold is a good investment and a hedge against currency devaluations. It seems to me that that is a good explanation of the past, but of course the future may be very different, especially if the US Fed starts to show signs of stopping QE, and the USD appreciates as a result – that would give gold a reason to drop.

  3. Nigel says:

    These games are great. To me, it highlights that everyone is entitled to their difference of opinion, and that there is usually no definitive wright or wrong answer to any set-up.
    Michael, is there a way to browse all available CMC commodities by client sentiment strength or weakness? Thanks.

    • Hi Nigel – at this stage, the client sentiment is available only in the single instrument area – but it’s a good idea, and will pass it on to our developers – thanks for the feedback

  4. chas cheong says:

    Michael, with the knowledge that 89% customers have a long position, does it have any predictive power?

    • Hi Chas – it depends on a number of factors, including how well CMC customers reflect the broader trading community. If this positioning is typical of traders, it may suggest that buyers are set, and the risks are on the down side. Some traders will align with “the strength”, others will take a position against the crowd – its up to the individual trader to interpret.

  5. Tim says:

    The client sentiment tool is a great addition, now feels like we are one cmc trading team. Its the same with the blogs too.
    while your taking feedback could you add volume to tec chart tools. if we have it could you explain how it bring it up.
    thanks

    • Hi Tim, thanks for your thoughts. Volume is not available – the charts are of the CFD price, not the underlying market. Exchanges charge significant fees for this information, and the cost of providing volume for the more than 3,000 instruments available to CMC customers would be enormous

      • Tim says:

        Thanks michael
        I like to check volume in a break out chart , which i can still do by looking on the cmc stock platform. Wasnt aware of costs but i can see now that this information that asx process and would charge for.
        Not sure if you have an ask a question contact ? but was looking at bhp pullback sitting on the 61.8 fib from recent rally. I know you bloged on this rally before and would be interested in your thoughts.

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