Gold and Gold Equities Pop and Oil Has a Drop
Gold and gold equities have performed well over the past two months climbing in value as the broad market drifts sideways waiting for buyers or sellers to step up to the plate. I am hearing traders in a panic saying they think gold is going to start moving $100 per day and are jumping on the band wagon, and that gold's going to $3500 per ounce soon. While that is possible I just don't see it happening right now and that we need to jump on the band wagon and chase this high price. I provided three charts of gold and gold equities to show you how I see things right now.
Gold Bullion Trading Fund - GLD
Gold has been trading up here in this range for the past 3 weeks and to me
it is looking very unstable and toppy. I expect to see some type of pullback
towards our support trend line as profit takers step. I like to buy during
pullbacks but unfortunately we had the news with the recover/bailout plan
and that scared investors and they dumped a bunch of money back into gold
the past 2 days giving gold a nice move higher. This heightened fear level
could push gold higher for a couple days, but a retrace will eventually have
to happen. I also want to point out the huge volume today. The last time
we saw this type of volume was when gold made a huge move higher and almost
marked the high for the previous rally in Sept. I am not reading into this
much but it's something to note.
Gold Bullion Trading Fund - GLD Daily Chart
Gold Bugs Index - Gold Equities
Gold equities posted a nice move higher today as they move closer to their
ascending wedge pattern. While this is a bullish pattern and stocks of all
types are starting to have buyers push them higher, I do want to mention
that this bullish pattern looks a little weak. As you can see in the chart
it is battling the 200 moving average, momentum looks to be diverging as
well as the stochastic indicator. The one really good thing gold equities
have going for them is that if the broad market is bottoming and start to
move higher which could pull gold down as investors dump their money into
growth stocks, these gold stocks will benefit as investors put their money
into gold stocks as well pushing them higher.
Gold Bugs Monthly Chart
As you can see on the monthly chart, gold stocks are currently under long term
resistance and the 50 moving average. Like I mentioned earlier gold stocks
should perform well when the market bottoms giving them an extra boost if
gold continues higher. I thought that this monthly chart shows the bearish
trend and that gold stocks are at resistance looking from a distance.
Crude Oil Trading Fund - USO
Crude oil traders continue to see the downward selling pressure which has haunted
oil prices for the past 7 months as oil hits a multi year low again.
USO Crude Oil Trading Fund
Gold and Oil Trading Conclusion:
Both gold and gold equities are on a buy signals, if you are long or decide
to buy here remember to place stop orders to protect yourself in case things
rollover. Its better to break even or have a small loss than it is to hold
BIG losing position for a long time. You can always buy it back if things
look bullish even if it happens to be the next day.
The broad market is starting to look like its bottoming as buyers stepped back in today as we reached the bottoms for the SP500 and Dow. We won't see a big rally until oil bottoms and turns up lifting energy stocks, and we need the financial stocks to start moving higher as well. Once they start moving up then I expect we will see some exciting gains in stocks as investor will have confidence again. Looking at oil I expect we will see lower prices over the next week or so as it hopefully flushes out the last of the sellers.
Because the market looks to be bottoming I will be looking at some speculative stocks which are showing signs of strength and have big potential. Most of these stock plays are explosive. Trades will last anywhere from 3 days to 2 months. The down side risk on some of these could be 15%, but potential reward will be 25+%. This is a stock pickers market now and finding the individual stocks at times like this can be life changing.
If you have any questions or would like to receive my trading newsletters please visit my website: www.TheGoldAndOilGuy.com.
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Author: Chris Vermeulen
Chris Vermeulen
TheGoldAndOilGuy.com
Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com. There he shares his highly successful, low-risk trading method. For 6 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets. Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return. Reach Chris at: Chris@theGoildAndOilGuy.com
This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.
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