Do Gold Bugs Have A New Gold Leg?

By: Chris Vermeulen | Thu, Jul 23, 2009
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It's that time again when the gold bugs come crawling out of the wood work.

Monthly, weekly and daily charts are all about to move close together and when then happens be ready to buy gold and gold stocks (golden rockets). Technically speaking we are still a long way from the HUI monthly chart breaking out to the up side. But if this bullish price action continues our weekly and daily trading signals will reap big rewards as we enter gold early before the next leg (rally) higher.

Breakout Sequence and Trader Type:

  1. Daily Chart - short term traders
  2. Weekly Chart - intermediate term swing traders
  3. Monthly Chart - long term investors

HUI - Gold Stocks Index Monthly Chart

As you can see from the chart the momentum (MACD) has crossed over which is bullish. The HUI:GLD ratio indicator is moving higher and about to breakout as well. These are very bullish signs for gold in the months to come. I use the daily chart to enter and exit but the longer term charts provide me with the overall trend and momentum (power behind the move).

HUI - Gold Stock Index Daily Chart

The daily chart has a lot more price action which is great for short term traders. As you can see gold stocks broke out last week from the downward trend channel. This is a bullish sign and the first step towards a much larger rally.

GLD - Gold Exchange Traded Fund - Daily Chart

Gold is forming a similar pattern to the pre-May rally as noted on the chart. I am looking for a pullback in price which will allow for a low risk setup. I do not like to chase prices higher because risk increases substantially and there is generally a pullback providing an entry point in the following days.

GLD - Gold Exchange Trade Fund Weekly Chart

The weekly chart has yet to breakout and the momentum has not turned positive yet. This is one really nice looking chart. It has multiple bullish patterns all converging at the same point which could create an EXPLOSIVE rally higher in the month to come.

On the weekly chart we see these bullish chart patterns:

  1. Large Reverse Head & Shoulders - Very Bullish
  2. Large Cup & Handle Pattern - Extremely Bullish
  3. Bull Flag/Pennant - Bullish

We continue to wait for gold to work out the kinks and provide us with a low risk entry point. From a seasonal stand point Sept, Oct, and Nov are strong months for gold and I expect the move to happen then if it rallies.

Gold Sector Trading Conclusion:

It feels as though we are on the verge of a big gold rally. This is if the US financial lords run out of money to short bullion or finally run out of gold to sell. Either way; once gold starts to running I don't thing there will be much looking back until the $1200-$1500 level.

Gold stocks are now starting to show signs of life and when that happens in conjunction with the monthly, weekly and daily charts are forming bullish breakouts, look for some Golden Rockets which are junior stocks which have good cash flow and a solid management team behind it.

We continue to wait with our finger on the buy button for gold as prices drift sideways on the weekly chart. With everyone so bullish on gold I have to wonder if we are about to get a sharp correction hence the reason I wait for a low risk setup.

If you would like to receive my Trading Signals and Golden Rocket Trades please visit my website at: www.GoldAndOilGuy.com.

 


 

Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
Collingwood, ON, L9Y 3Z1

Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

- Interactive Brokers
- Trade MONSTER
- MB Trading
- OEC OpenECry
- The Fox Group
- Dorman Trading
- Vision Financial

He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

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