I still have not bought gdx - 3/27/12

In the last four days GDX made a new bottom followed by a five wave flagpole that broke out of a month long downtrend channel. After breaking out it formed a two day, three wave, flag that rested on the downtrend channel break out. The description sounds almost perfect, but I didn't buy and GDX is lower this morning. Why did I not buy what appears to be a perfect set up?
I will describe what happened with the charts. The top chart is a four week long, ten minute bar, candlestick chart of GDX. And the lower chart is the last eight days of the top chart.

The chart above shows the channel, the break out, and the two day flag. This chart ends on 3/27/12.

This chart is the same as the end of the first chart. First we have the double bottom which occurred on 3/22/12. The second bottom was $0.03 above the first. It would have been nice to buy there and make a few percent, but I mistook the weak flag that formed for a triangle and thought it would go down the next day. After the second bottom, the five waves up are labeled 1 -5 and the two waves down are labelled A, B, & "C?"  Most of my buys are single day flags, but I do buy multiple day flags when the set up is right and this looked right.
The first hint of a problem came just before the point labeled B which is at the end of a one day bearish flag. In the last few seconds of trading that day I saw at least 10 blocks of 20,000 or more shares sell. Normally, those that bought in at the bottom would not sell all of their shares just after a channel break out, but the big players were definitely selling. That told me to watch out.
The next day, 3/27/12, GDX formed a very nice flag resting right on support, but the gold bugs index ($HUI) spent most of the last ten minutes of the day below support, only managing to peak above it at the close. This was another warning.
The end of a two day flag usually rises off the support and ends up forming a white candlestick on the daily chart, but this flag formed a black, bearish engulfing candlestick the day after a hanging man candle stick. That's double bearish and another warning.
The last half hour of trading in the general market was marked by a series of new lows for the day, forming bearish shooting star candles on the charts. If the general market goes down, it can easily pull gold stocks down. Another warning.
Finally, only two of the ten big sellers bought back at the end of the day on 3/27/12. If it was truly a bullish flag, I would expect them all to buy back in. That was enough for me and I decided to wait for confirmation. GDX is plunging today so I'm still waiting.
Happy trading.

Why I did not buy Friday's "Flag" in GDX

If you look at the action in GDX on Friday, without the perspective of the days preceding it, it looks like a perfect flag buy signal. Yet I did not buy and did not send out a buy alert to my subscribers. In fact, I told them not to buy. Why is that? Here is Friday's chart:




There is a nice strong flag pole followed by a nearly perfect looking flag. The volume was right and everything looked good, but only from the perspective of that single day. The top of the flag was bumping up near the resistance of a previous breakdown, but even that doesn't normally stop me from buying a flag.
Here is a little wider view of what happened:




The first chart is contained within the oval on the second chart. Notice how the beginning of Friday's "flag" was actually a breakdown from the original flag pole outlined in the green lines. This was good because my definition of a buyable flag requires a channel break down from the flag pole. The next thing it did on Friday was climb back into the flag pole channel and go to a new high for the move. The new high negated the flag pole channel break that occurred earlier so now prices were still in the flagpole and stayed there for most of the rest of the day.
The new high also caused me to adjust the flag pole bottom downward to include Friday morning's low. So now you see that the flag pole channel had not been broken on Friday, so a flag could not form.
Today is a different story. The new flag pole channel, outlined in red, was decisively broken this morning and gives me hope that a flag could form here. A buy today is unlikely because the bottom of the flag pole should be tested before a flag forms and that will take some time. A two day flag is entirely possible for today and tomorrow, giving the possibility of a buy for tomorrow afternoon.
Another possibility for tomorrow is a drop to new lows. This would not be a flag, but would open up other buying opportunities. Stay tuned.
Happy trading.