Trend is your friend. That is written in almost every book about investing. All experienced traders know that. Most of all beginners ignore that. Let me show You the perfect example for the power of the trend (no, it won't be the recent upswing on the USD/JPY). It is gold. Although in the long term (few years) I am very positive on this precious metal, I have to admit that for now, there are no mid-term buying signals here, whatsoever.
Gold is now the spot-on illustration of the flawless down trend. What are we having here is a downswing paused by six nice corrections (2 flags, 2 pennants, 1 wedge and one, not yet named, developing now). The odds for a trend continuation are always higher than for the trend reversal. That what most of the traders forget when they try to go counter-trend. Obviously it cannot last forever but for the trend reversal we need much more signals, or in this case, any signal.
When we combine technical factors together we can estimate that the lowest blue line on the chart (supporting latest correction) should be broken anytime soon. If you are, like me, bullish on gold, look on the red down trendline. As long as the price stays below, the sentiment stays bearish. Once this line will be broken, counter-trend traders can think about going long.
