How to Find Low Risk SP500, Gold and Oil ETF Setups

By: Chris Vermeulen | Sun, Aug 1, 2010
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As we all know there is an unlimited amount of ways to trade the financial markets. Each person sees the market in a different way, has different skill sets, trading experience and risk tolerance levels. While some individuals create and use complete systems to make money there are some very basic trading strategies which still work well and require nothing more than basic charting, patients and a little money management.

Let me explain:


SPY - SP500 Index Trading Fund

You can clearly see the longer term trend which is down (blue trendine). But from simply drawing a couple trendlines and looking at the MACD (momentum) indicator you can see there is a possible trend reversal taking place. So far the SPY has broken out of its down trendline with a 4 day pop, and it's now pulled back down to test support. A close below the trend line or the 50MA would be the exit points if the market did start to go south.

The SP500 is still stuck under major resistance, its 200 day moving average. But is trading above key support levels (20MA, 50MA and Trendline). I can feel the tension in the market between traders and we are about to see a big move once a breakout to the upside or down side is established. At this time its best to be in cash or have a small position with a protective stop in place. Once a trend starts there should be some low risk entry points along the way. If we see a strong reversal to the upside On Monday or Tuesday I would expect big buyers would step in to catch this new trend up.


GLD - Gold ETF Trading Fund

Looking at the price of gold we can see the trend is still down along with the momentum. A breakout would be the first step towards a possible entry point but I prefer to wait for a pullback after the breakout has taken place. Once we get a test of support I look to enter a position once there is a strong reversal candle to the upside. From there I draw a new support trend line from the previous low and connect it to the new pivot low (bottom of reversal candle). That becomes my new protective stop.

Gold still has some work to do before I would even be interested in taking a long position for a swing trade. But on a short term time frame (intraday charts) gold looks to be forming a low risk setup which I hope unfolds for my subscribers this week.


USO - Crude Oil Trading Fund

Oil has been trading in a large bearish pennant for the past 2 months and it is nearing the apex of this pattern. The longer term picture of oil is bearish but the most recent dotted trend line and the 20/50MA crossover is signaling some strength. Also the momentum for oil is positive and that helps support the price also. Again if this was to breakout to the upside I would wait for a low volume pullback to test the breakout level, then enter on a reversal back up.

Oil is one of the more challenging commodities to trade because it is affected by the US Dollar, Political Events, and Weather. In short, even if you had the analysis and timing correct there are other factors which move the price of oil on a regular basis that could quickly turn the trade against you. That being said, keep trades small when trading oil.


How to Find Low Risk Trading Setups:

In short, trading can be complex, simple or somewhere in between. You can spend 14 hours or 20 minutes a day analyzing it depending on what investments you trade, whether you're trading full time or just checking up on longer term investments.

This analysis and basic strategy shown above can be profitable if followed correctly and works for stocks, commodities and indexes. It's just to show how simple one can swing trade the market using very basic analysis. Personally I use a much more complex strategy incorporating 15+ other data points which allows for precise entry and exit points.

 


If you would like to get my Low Risk Trading Signals visit my services at:
www.TheGoldAndOilGuy.com - ETF Trading - Index, Sectors & Commodities
www.FuturesTradingSignals.com - Futures & ETF Trading - Index & Commodities

 


 

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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