Signs are pointing towards a possible climax run for $GLD but please note that this may only be the beginning. Climax runs can push stocks and commodities to extreme levels with parabolic shapes at nearly 90 degree take-offs. Gold is starting to make a similar run, right now!
I have nailed several climax tops in the past and will use two prominent examples to highlight the extreme runs they made before dropping hard. These examples will also show us what to look for when selling into exhausting strength and possibly taking the opposite side of the trade on the down side.
Both Platinum $PL_F and PetroChina $PTR formed climax tops that I highlighted in real time on the blog back in 2007 and 2008. I started to notice both climax tops early in the run so use that information when analyzing my take on the current $GLD chart. I am most likely early and I feel that gold may have more rebound power if it does start to drop. What do I mean? I mean that Gold may drop hard (short-term), only to find support and then resume its up-trend.
I don’t know if Gold will fall apart the way that Platinum and Petrochina did a few years ago because the global economy is in bad shape and humans have been programmed to turn to the shiny metal as protection against “all things bad” – such as fiat money, recessions and depressions, etc.
Platinum Climax Top? | February 18, 2008
What catches my eye is the extreme run-up over the past two months as the metal seems to be making a climax run (out of character during the 10-year up-trend). Similar action started to happen in PTR and I highlighted it in the exact manner as I am doing here with $PL_F in a post titled The Real PTR Climax Run.
The Real PTR Climax Run? | October 10, 2007
…the HUGE volume on the latest push to new highs clearly indicates something is going on.
…a climax top is where the stock has advanced for many months and suddenly races up for one or two weeks much faster than any prior one-or two-week period or since the beginning of the stock’s long move up.
I sell gold rings and it has been so hard to keep up with the pricing. Actually recently it has just gone up and up.
Given the length of gold’s run, I wouldn’t be surprised if this climax/blow-off top persists for an extended period (many months).
I also wouldn’t be surprised if this is a “mini-blow-off” that leads to a deep correction and then resumption of the underlying trend.
This is fascinating stuff as usual Chris.
A few questions: 1) In that top chart, you say a possible climax top is forming. Is that the point where you would pound the stock harder or would you pull out of it?; 2) Nailed climax top on the bottom chart…wilst does this mean?
Gregori, he means he called the climax top right before it switched to a downturn. As in, in 2007, he posted about a climax top for PTR during the blue candlestick, pinpointing the reversal, ‘nailing’ it.
scrilla_gorilla,
I agree with your term “mini blow-off”.
Gregori,
I advise that longs start to cash in their profits here during the climax run. It probably has some run to run higher (as seen today) but a drop may be coming based on chart. I don’t see Gold crashing but a sell-off is probably likely.
Kleen – thanks for clarifying!
Chris, this is little tad off topic. i am coming to states in two weeks time. i understand there is magnificent earthquake. should i be concern when sightseeing? i am asking you because you are engineer as well as stock guy.
Cheers,
Gregori
What a fantastic call. What do you think about AAPL as of today?
Alex,
AAPL will pullback some but I don’t see a climax top, not yet at least.
How about now Chris? 🙂
It’s extended but I will not be one to take a position in either direction. There is an unfilled gap above $425 so I am curious to see if this ever fills. It’s tough to continue higher when trading 40% above the 200d ma.