Charts and Commentary

By: Marty Chenard | Sat, Apr 22, 2006
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Today, we will look at the gold market again and show you a simple technique that could have generated a 26% gain on the GLD ETF since last November.

First, gold is an unusual investment. It is bought on fear, inflation concerns, and greed when trending strongly. This is a commodity where you can get greed super up moves, and reversal panic sells. While the long term trend is up for gold, on the short term it will swing to extremes. Today, we will show you a simply technique to catch the "swings" in gold in a profitable way.

While yesterday's chart showed gold's long term bull action, the short term was overbought with an extreme RSI. This exposed gold to a short term reversal at any time. Using today's technique, you would still have been up 10.59% at the close on yesterday with the GLD (Gold ETF).

Here is the simple technique ...
Construct a Gold (ETF GLD) chart using the following:
1. The price chart with an Exponential Moving Average of 3 and 6.
2. Add a Stochastic set at 13-5-5.
3. Add a Relative Strength of 14.

When the Exponential Moving Averages have a Red/Blue cross over to the upside, AND the Stochastic confirms it with a cross over, then go long. The RSI should also be moving up at that point.

Hold that position until you get a cross over of the Red/Blue Exponential Moving Averages to the downside with a Stochastic downside cross over, OR an overbought peak on the RSI and then sell. (When not at a peak, draw a trend line on the RSI, and if it breaks support, it will often give you an early warning of a down reversal just before the Exponential Moving Average and Stochastic turns down.)

Although this is a simple technique, using it since November on Gold would have given you 4 buy and sells. The Buy/Sells would have produced: +8.1%, +7.8%, -0.49%, and +10.59% for a total of 26%.

There are different techniques for sideways trading markets, and those that are short term volatile. For a strong up trending, bullish item like gold, this technique works well until it goes into a trading range.

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Marty Chenard

Author: Marty Chenard

Marty Chenard
StockTiming.com
Asheville, NC 28805
Tel: 828-296-1200

Marty Chenard is an Advanced Stock Market Technical Analyst that has developed his own proprietary analytical tools and stock market models. As a result, he was out of the market two weeks before the 1987 Crash in the most recent Bear Market he faxed his Members in March 2000 telling them all to SELL. He is an advanced technical analyst and not an investment advisor, nor a securities broker.

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