The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( TheGoldandOilGuy) -- The past couple weeks have been tough for most investors. The recent light volume rallies which have taken place in gold, oil and stocks has been generating mixed signals for technical analysts like myself. In order avoid a large draw-down on your trading capital you must focus on the long-term intraday charts. What is a long-term intraday chart you ask? It is simply a four- or eight-hour candlestick or bar chart. For example the charts below in this report are four-hour charts. So each candlestick represents four hours. Follow TheStreet on Twitter and become a fan on Facebook. Why should you use these long-term intraday charts instead of say a daily chart? There are four main reasons:
- If you used a daily chart then this information would be condensed showing you the daily high, low, open and closing prices. While the four-hour futures chart shows you large multiple, intraday chart patterns that most traders would never see -- patterns not seen by the average investor have a higher probability of working in your favor. Also these patterns are much larger than just normal intraday patterns which you see on the five-, 10-, or 60-minute charts. Remember the larger the pattern the more potential profit there will be .
- These longer time frames allow us to follow gold, silver, oil and stock indices around the clock using futures contracts. Think about it ... regular trading hours from 9:30 a.m. to 4 p.m. ET only allow you to see a third of the price action each day. That means you are only seeing parts of larger patterns while the 24/7 contracts show you all price action.
- The last reason you must use futures charts is for the volume readings. Futures show real volume levels that can be used for trading. So the volume you see on ETFs will not have the proper volume levels for that specific commodity or index. More times than not it almost the opposite.
- My last reason for trading long-term intraday futures charts is because the price of the underlying commodity or index moves true, while the ETFs which try to shadow these commodities generate false breakouts and breakdowns on a regular basis. Watch my video about this.