Interestingly, there is an inverted Head and Shoulders Pattern in the Dollar.
Head and Shoulders Bottoms have an even higher degree of reliability than the Head and Shoulder Top. Only 5% of these patterns fail. A huge 83% of these patterns reach their predicted price range. Although the minimum targets are quite modest, the average rise may be as high as 38%, making the Head and Shoulders Bottom one of the potentially most powerful patterns known to traders. (Source: Encyclopedia of Chart Patterns, by Thomas N. Bulkowski)
How can a “conservative” asset like the U.S. Dollar rise 38%? The answer lies in the unwinding of the dollar carry trade. Traders who went short the dollar and long “any other asset” now have to start unwinding their trade by selling their “any other asset” and buying the dollar. We will soon find out just how massive this trade is. Don’t be on the wrong side of this trade.
Here is my side of the story: Tony, I am a short-term gold futures trader.
I rarely carry positions for more than 48 hours. As a trader, I have no bias about where price will go or when it will get there. I have a plan based on technical and macro analysis, as gold cannot be traded “in a vacuum.” The most two most important elements in my trading are price and order flow. I will go where they are telling me to go, and the direction does not matter. Last night, I started shorting gold heavily and am still short as we speak today. But, I am much less short than I was in the early hours of this morning. I still think that the gold bears are targeting the 1026 area. But I am not attached to this number do I care if it gets there—with or without me. Your analysis is among the best I have seen, Tony. But I do not trade from analysis, rather than from signals and setups. I suggest we wrap this up now, Tony, and have a nice soothing cup of chamomile tea.
Dr. Janice Dorn is the only Ph.D. (Brain Anatomist) and M.D. (Board-Certified Psychiatrist and Addiction Psychiatrist) in the world who actively trades, writes commentary on the financial markets and manages a subscription-based website. Dr. Dorn has been trading the gold futures markets full time since 1993. She has written over 1000 articles on trader and investor psychology, and mentored over 600 traders and investors.She writes on all aspects of trading psychology and provides a real-time trading service on her website: TheTradingDoctor.com.