The Natural cycles of commodity prices correlate beautifully with the natural cycles of the planets in our Solar System. Each commodity has its very own special cyclical rhythm, just as each planet has its own cycle. When combined they create a superb trading tool (this is a fact W.D. Gann knew well).
One of the cycles we have investigated rides in tandem with the ﬂuctuation of gold prices, it is the passage (transit) of the planet Mercury through the area of the sky (zodiac) known as Sagittarius. Heliocentric Mercury makes one complete trip around the sun every 88 days, and is in the sign of Sagittarius for approximately 11 of those 88 days. Amazingly, this cyclical passage correlates with the increase in gold prices about 75 percent of the time. In the remaining 25 percent the reverse is true, as prices fall or enter congestion.
A classic example of the type of price action to expect is shown on graph I. This classic action calls for the price of gold to move up sharply while Mercury is in Sagittarius, then price falls rapidly as it travels into the next sign of Capricorn. Each sign has 30 degrees, and we ﬁnd that prices tend to top out around the 26th degree of Sagittarius, which is the exact degree of the Galactic Center. The Galactic Center is sensitive to the transit of all planets and therefore is an important trading tool in itself.
Just how closely gold prices follow this classic example is dependent on other factors, such as whether any other prominent planetary cycles are also in effect. If this is the case, variables are created. The planetary cycles are cycles within cycles which all begin and end at different points. It is for this reason that the actual price patterns of gold while Mercury is in Sagittarius are never exactly the same. But there is more than enough similarity of pattern for use as a viable trading tool.
There are several ways to utilize this phenomenon for trading purposes. It can be combined with your favorite technical trading tools or used with my trading rules listed below.
1) Always BUY on the day before Mercury enters Sagittarius. Unless on that day a “key reversal down” or “two-day reversal down” pattern forms, in which case SELL (see graph II). Also if the close on the day in question is under a major trend line or if one of your favorite sell signals is given, do not buy (If you sell instead of buy, you must reverse all the STOP, rules given below).
NOTE: Whenever key reversal or a two day reversal forms at the time of a planetary signal, it greatly increases the validity of these two technical signals.
2) For the next three days following an entry into a trade, place a STOP at 1.50 below the low of the day the trade was initiated.
3) After the third day, add a 45 degree trend line (Gann line) off the low, which would be the nearest previous low or isolated low (see graph I). Each day thereafter place a STOP at 50 cents under the 45 degree line.
4) If you are stopped out in the ﬁrst three days of the trade, immediately reverse your trade to SELL. Be sure also to reverse all the STOP rules to monitor this short position.
5) If a key reversal down pattern should form within the ﬁrst three days, reverse and be short on the close of the key reversal bar. To qualify, this key reversal bar must be larger than the previous days bar or be at least ﬁve points in range.
6) If a two-day reversal down pattern forms within the ﬁrst three days, reverse and be short on the close of the second day of the pattern.
7) WHERE TO EXIT THIS TRADE. Take trade off at the close on the day BEFORE Mercury leaves Sagittarius.
8) Optional. If the last day of Mercury in Sagittarius is, for example on January 18, the three days prior to the last day are January 15, 16 and 17. On each of these days place the STOP at 50 cents under the low of the previous day. If a key reversal down or a two-day reversal down form on the last three days, take the position off at the close of that day.
9) Trade in units of two contracts. Take the ﬁrst contract off at a ﬁve point proﬁt and leave the second contract on until stopped out or until rule number seven is initiated.
By following these rules and trading two contracts only from January 1986 to September 1988, the proﬁts were $18,850.00. This was just four trades per-year of eight days or less in the market on each occasion. Combining this cycle with other planetary cycles and tools increases the proﬁts tremendously, but also increases the exposure and risk. More methods of trading with the planetary cycles are clearly illustrated in my book Basic Astrotech, which is the result of many years of research.
- Trading Planetary Cycles Proﬁtably By Jeanne Long
- See Also Book: Universal Clock: Forecasting Time and Price in the Footsteps of W.D. Gann