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Posts Tagged ‘gld gold etf’

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Major Reversal Day On Gold and Silver, Could Be A Climax Top

In Market Analysis on November 9, 2010 at 9:22 pm

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After trading through both bull and bear markets and witnessing hysteria and panic, I’ve learned that whatever method you use to buy stocks, you must have a discipline to sell. When I buy, I look for support levels and oversold conditions so that a reversal could bring about a major gain and the downside risk is calculated. As I wrote in my buy signal in gold in late July, the conditions were ideal for a major move to the upside. Now the conditions are reaching the extreme opposite, it’s overbought and surpassing measured moves and upper resistance lines which mark prior turning points.



The majority of traders become reckless at extremely overbought levels and are often stuck when markets correct to find support. They abandon their methods as their accounts grow in value and don’t factor in how events may change. Right now gold is the easy trade as most of the reports from the media outlets are bullish for gold and silver in light of the second round of quantitative easing (QE2), but is it the prudent trade? Could events trade in Washington or globally which could put short-term pressure on commodity prices?

The most dangerous trade is the painless trade, when siding with the consensus. People have a herding desire when coming to the market. They feel most comfortable when others are doing the same. This is the characteristic that’s the downfall for most traders as the market humbles the greatest number of people. The best trades are the uncomfortable ones, when you go against the crowd. The best way to remain emotionless is sticking to a plan. If one has a method, he can avoid the psychological challenges that the markets present during panics or hysteria. Although it may not be popular, it eventually works out as the panic subsides.

Many investors are now buying precious metals aggressively and borrowing on margin, which I believe is too late and dangerous. Many are concerned that they’ve missed the boat and are panicking into the gold and silver market. It’s important to have a technical mechanism to move to the sidelines as latecomers chase the market higher. The volume on the Silver ETF (SLV) is reaching record highs and I’m concerned about a climax top. It’s very hard to sustain a move of this magnitude without a major correction. Although it takes courage taking profits during a bubble, I’ve learned through many experiences how important it is to stick to a method and sell into strength. There’s significant risk of a correction and limited potential on the upside short term.

After being in the precious metals markets for years, I’ve learned its volatility. I’ve seen great euphorias followed by panics. Gold and silver is reaching a level of euphoria, so stay tuned for any signs of weakness.

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Miners And Base Metals About To Break Out

In Market Analysis on October 6, 2010 at 5:16 pm

We have all heard the saying “buy low-sell high” as the mantra of making money in the market.  To apply this cliche is much easier said than done.  Adhering to this rule is not an easy task and without the use of technical tools to determine buy points and targets, an investor can get caught up with the hysteria of a parabolic move.  Now gold and silver is making huge advances as it continues the trend into new record territory.  I wrote an article that discussed the original buy on gold as it came to long term support and also wrote articles discussing the coming break out in gold and silver from the cup and handle pattern.  Since these moves gold and silver have made historic and powerful moves.

As prices rise in precious metals so does confidence.  All over the news I am hearing how the world banks are printing money and that gold and silver could move exponentially higher.  Positive news for hard assets including yesterdays massive quantitative easing by Japan and the United States commitment to keep on flooding the markets with cheap dollars is making gold and silver investors very comfortable.  Whenever confidence increases like this it is time to prepare for profit taking.  Risk is being increased and “Johnny Come Lately” analysts are advising to jump on the bandwagon.  I refuse to follow this mad crowd at this time.  A successful speculator knows when to enter a trade when at the time the investment is unpopular.  Don’t follow the crowd and be prepared for exit signals as we are reaching technical targets.

Unfortunately the majority of investors tend to follow the crowd and do not have technical targets that will take profits after a reasonable move.  Just like in popular culture there are fads that come and go, so too in asset classes.  Be careful of the hype that is accompanying the trade now.

As gold and silver reach overbought territory, I am providing detailed targets to my readers on where to take profits from our buy points at the end of July.  I have recently been focused on some miners which have pulled back and ready to outperform even if gold and silver have a pullback.  These miners will be extremely profitable at significantly lower gold and silver prices.  Miners are just beginning their break outs and many have not caught up with the bullion price yet.

The movement in gold and silver bullion is getting extremely emotional.  Yesterday’s gap up after a significant move signals we may be close to the coming pullback in gold and silver bullion.  Make sure to check out my free newsletter at http://goldstocktrades.com to find out key technical signals.  Don’t get comfortable now if you have considerable profits and be alert for any reversals.

Even though gold and silver have broken into new 52 week highs platinum, copper and other base metals have not broken into new territory.  If one is looking into dollar diversification at the moment I would look into other hard assets that have not moved as  parabolically as silver and gold has.  Platinum and copper are showing strength signaling that the massive printing will encourage the global economy to gather steam.   Although gold and silver are en vogue now from a technical standpoint other commodities which should also benefit from quantitative easing should be considered as they should catch up with gold and silver.  Platinum and copper are about to make the golden cross, which is the 50 day crossing the 200 day moving average to the upside.  These two metals may break out and catch up to the other hard assets in performance.  As gold and silver reach parabolic levels other hard assets which are not overextended may provide a better risk to reward investment.

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Gold At Long Term Trend Support, Key Level Highlighted

In Market Analysis on July 27, 2010 at 8:08 pm

Gold is now reaching long term trend support after falling the last few weeks as investors returned to bid up the Euro and equities.  The bounce in equities, especially financial, retail and real estate may be short lived as volume indicates that there is not much conviction from major investors on the upside.  Gold has recently been the safe haven as investors sought shelter away from the Euro when it was having the sovereign debt issues.  Now that those issues have been quelled, gold has had some selling and it has now reached an oversold  condition and a long term trendline which is acting as major support.

Stock prices move in trends.  In a bull market, it is quite often easy to identify the ascending bottoms.  Being familiar with trendlines allows the investor to enter long term bull markets when they are oversold and at key support.  An investor must always be aware of a stock’s underlying long term trend. This can be counter-intuitive and awkward, as most times when it comes down to support you have to think against the market herd and buy when others are selling.  It’s like buying a winter coat in the heat of summer. Gold is on sale, and presenting a low risk, high reward trade, but it requires non conformity with the crowd which is not an easy task for anyone.  Many of us like to be in what’s hot now situations, rather than seeing the bigger picture and entering into a trade when it is uncomfortable.

Gold is now at my buy point of the rising long term trend support line.  GLD touched that line 6 times, which signifies that this trendline is a reliable point of support.  The significance of this line is that it is not steep, which also brings a higher probability that GLD will find support here.   It is also oversold.  Continued weakness here and a break below this long term trend would be troubling and highly unlikely.  If there is a break most likely it would be exhaustive, meaning that it will shake out a lot of shares before the next move higher.  I do not see $1200 as a top in gold as there are no technical signs of a major top.

On the other hand, financial stocks may be finding key resistance here following a low volume rally.  As investors are digesting earnings reports that claim credit is improving and lending is increasing, consumer confidence is weakening and the unemployment rate is still very high.  A jobless recovery is what many are considering we are experiencing.  It seems that this recovery has been good for wall street while main street has not seen an improvement. The financials have found resistance at the 200 day moving average and have now failed four times, significantly breaking through this point of resistance.  Historically speaking, after a few failed rallies a major drop could occur.

At the writing of this article, housing has also had a significant reversal after recent data showing an increase in pricing in some metropolitan areas.  Investors are selling home building stocks on positive news, which  indicates that there is some caution over what the real estate market will resemble after the home buyer tax credit expires.  The chart shows a clear reversal and I expect that the rally in equities will be coming to an end and that gold’s poor summer performance will be different this fall as many weak hands were shaken out.  An explosive fall rally into new highs is expected as I still have a target of $1400 by year end.

Disclosure: I own shares in gold and silver mining stocks.