A gold-miner channel plan from value to false breakouts

From a scan to a written plan

A weekend intermarket scan showed bearish setups in the US dollar and government bonds alongside a bullish setup in gold. That combination led the trader to express a long-gold view through gold-mining shares.

Editorial reading: the scan supplied a directional bias only. The idea became a falsifiable plan once a buy zone, a stop, a target, and a reward-to-risk figure were written down, and once the review chart specified a price-channel with false-breakout rules.

Permission and the first value line

IAMGOLD was treated as holding support near its 50-day moving average at $12.50. A moving-average is a trailing average of recent closes used as a support or value reference and as one boundary of the value zone.

Weekly and daily impulse readings permitted a buy. The impulse-system is a permission filter that allows buying only when weekly and daily impulse readings are not in a sell color.

Editorial note: permission to buy is not an entry signal. The impulse-system only cleared the way. The written zone set the live order, and the review chart later named the false downside break as the buy signal.

The live plan and the fill

The initial plan was to buy between $13 and $13.50, stop at $12.30, and target $15.50. Reward-to-risk is the planned target distance divided by the planned stop distance. Here it was stated as 3.6:1 and used to judge whether the setup was worth taking.

The position was opened Monday at $13.38. After the stock approached the first target, the target was raised. An unattended Friday stop at the daily pivot exited the trade at $14.69.

How the review chart framed the channel

The review chart framed a steady uptrend whose periodic selloffs ended just below a value zone defined by two moving averages. Swings toward an upper channel line were treated as the overvalued side.

A price-channel is a band around value, often marked by moving averages and an upper channel line, used to frame swings from an undervalued zone to an overvalued zone.

False breakouts as the review signals

A Friday low of $12.64 undercut the prior Friday low of $12.67 by three cents and then reversed. That sequence completed a false downside breakout and was used as a buy signal.

On Thursday the stock broke 17 cents above its Tuesday high of $15.03 but failed to hold that level and closed back below resistance. That failure was treated as a false upside breakout and a cue to take profits.

A breakout is a probe beyond a recent high or low that is confirmed only if price holds the new side. A brief pierce that reverses is treated as a false breakout.

Editorial note: the live book was closed by the unattended Friday pivot stop. The false upside breakout is the review chart's profit cue, not the order that ended the position. The written buy zone and the later false-breakout reading should not be collapsed into one planned rule.