For months, SPDR Gold Trust (GLD - commentary - Trade Now) has been forming a "pennant" on its weekly chart, which I have been closely monitoring. Recently, the upper and lower channels of the "pennant" have been closing in on the current price of GLD, and its trading range has tightened up substantially, right above support of its 50-day moving average. As such, there are decent odds GLD will soon break out of its "pennant," and that could lead to substantial upside momentum in the coming weeks.
Although a "pennant" is a continuation pattern, not necessarily a bullish pattern, GLD has been in a long-term uptrend. Therefore, odds favor an upside breakout of the "pennant" shown on the weekly chart below:
GLD Weekly
Source: TradeStation
The Oil Service HOLDR (OIH - commentary - Trade Now) is another ETF I am monitoring for a potential buy entry in the coming days. The setup is shown on the daily chart below:
OIH Daily
Source: TradeStation
Yesterday morning (Aug. 27), OIH sold off to break below the lows of the previous two days, but it came into support of its 20-day exponential moving average (EMA); that helped OIH to reverse to finish near the previous day's close. While that morning weakness may seem bearish, it actually had the effect of shaking out the "weak hands" who sell at the first hint of trouble. This, in turn, absorbed overhead supply, and that could now enable OIH to more easily move higher.
For this setup, I like the idea of buying an initial half position on a rally above the two-day high (approximately 108.60). The remaining shares could then be added on further price confirmation that OIH will hold its breakout this second time around. Consider adding the rest over the 111.70 area. Scaling into a position in this manner is a great way to take advantage of a potential opportunity, while still minimizing risk in an indecisive environment.
Technical Analysis Still Dangerous, Despite the Rally 8/28/2009 8:00 AM EDT Buyers are jumping on pullbacks, but the downturn signal remains intact.
Technical Analysis Watching for a Pullback to Prior Highs 8/27/2009 4:24 PM EDT The market tends to return to its previous highs, and that's how we're playing it.
Technical Analysis Low-Priced Stocks Take Over 8/28/2009 7:00 AM EDT Some say the leadership by the $2 stocks is group rotation. It used to be called speculation.
At the time of publication, Wagner was long DGP (which is similar to GLD), and short FXI.
Deron Wagner is the founder and head trader of Morpheus Trading Group. His daily focus is managing and trading the Morpheus Capital Hedge Fund, which he founded in April of 2004. He also teaches his trading methodology with The Wagner Daily, The MTG Stalk Sheet, and The Wagner Weekly newsletters.
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