Newcrest Mining – Double Bottom Buy

Technical traders may be interested in Newcrest at the moment. It looks a  chance of completing a double bottom pattern that could see it build on the initial recovery from last month’s gold “flash crash”

Daily Chart

This pattern sits at what might be the completion of a 5 swing decline. This lends weight to the possibility of a larger corrective rally to come.

Newcrest Mining CFD - Source: CMC Tracker

Newcrest Mining CFD – Source: CMC Tracker

 Strategy

The strategy outlined on the chart is just one approach to trading a double bottom set up.

Profit objective: This approach seeks to take advantage of this pattern being at the end of a 5 swing decline. This means we could be starting a correction of that whole decline.

 Corrections like this often retrace at least 50%, so the initial profit objective is set at that level. One common approach to not to actually take profit at these objectives but simply to move stop loss levels higher once they are reached. This involves leaving risk on the table but has the advantage of really “running” profits on the most successful setups.

Trade entry: A double bottom pattern is not completed unless price breaks above the peak between the 2 lows.  This strategy waits for confirmation by setting a stop entry order a bit above the peak e.g. about $17.80

Initial Stop Loss: The stop on the chart is set below minor support back inside the double bottom pattern. This provides reasonable scope to withstand a retest after the initial break out.

Many traders will also use strategies that move the stop loss higher once a new uptrend starts to unfold.

About Ric Spooner

Over 30 years market experience - professional trader, broker, director
This entry was posted in Gold, Market, Shares, Stocks, Trading and tagged , , , , , . Bookmark the permalink.

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