But while multi-year highs are nice, we trade in the here-and-now, and shorter-term charts are more useful for managing trades in the present. So let’s look at the 6-month chart of GLD, the unleveraged ETF for gold that trades on US markets.
It’s not hard to see yesterday’s breakout. What’s more problematic is drawing appropriate lines to indicate support and resistance. Oftentimes there are several choices for support and resistance lines, which is why some charts looks like a piece of abstract art, with lines going every which way.
Some in the media have been tempted to draw “pennant” lines that indicate a breakout yesterday. The problem with such lines is that the upper pennant line has to follow candle tops of the way down, not go from a top to a bottom. Drawn properly, choosing pennant lines would show the breakout happened last Thursday, not yesterday.
Now that’s not really a problem, it’s a choice – but then you would have had to call the breakout last Thursday. Monday is too late – the horse has left the barn, the trade is already gone.
Your friendly Gold Enthusiast sees the chart as having a pretty clear, gradual uptrend channel on the present-end. And yesterday broke out above that, around the 150.25 price.
That’s a pretty good looking bottom point for trading using risk-reward strategies. Keep an eye on the RSI (circled in the chart) – it’s nearing overbought, and while it’s been higher RSI is usually a good indicator of when it’s time to have good stops in place.
The Gold Enthusiast
DISCLAIMER: The author hold no positions in any securities mentioned in this article. The author is long the overall gold sector via positions in NUGT, JNUG, a few junior miners, and covered calls on part of the NUGT and JNUG positions. The author may trade options positions in NUGT and/or JNUG in the next 48 hours if market conditions warrant.
The SPDR Gold Shares (GLD) was trading at $151.26 per share on Wednesday morning, up $0.35 (+0.23%). Year-to-date, GLD has gained 22.33%, versus a 27.24% rise in the benchmark S&P 500 index during the same period.
GLD currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #1 of 33 ETFs in the Precious Metals ETFs category.
About the Author: Mike Hammer
For 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.