Gold fell back today, bounced, and then rallied on continuing high volume. This looked to me like a selling climax and I took the chance to enter. The top chart shows approx. entry and stop positions.

The thing that makes me uncomfortable with this trade is that we are having a generally risk-off day, and gold is falling. Gold has recently been rising on risk-off days, because the euro crisis has led to people buying it for its safe-haven appeal (this is a change — for the past few months gold has definitely been a risk trade). However, the recent breakout would lead one to expect a pullback. So is this a pullback, or a reversal? I have decided to trade, rather than not trade — risk trades have generally not had the bounce of the past half hour or so that gold has had (except for a small jump in AUD/JPY), which tends to lead me towards the pullback and selling climax hypothesis.

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