Almost every trader has an opinion about the current and future price of gold. You are about to read mine in short order. But first, know that I have been a gold ( SPDR Gold Trust ETF (GLD)) grizzly bear since last year.
I patiently waited for a bearish pattern to develop, one that would offer the edge to the gold bear.
That pattern appeared on my charts in February ( see: 3 Peaks and the Golden-Domed House). GLD had coiled back then, around the $160 level. The RSI and slow stochastic had both turned down, signaling (for me) that the odds highly favored the short side player in GLD (gold).
Experience has taught me to stay with a successful directional bias until either that bias goes off the proverbial tracks or the set-up exhausts itself. Thus GLD is still in my crosshairs, the end game and climax for this mega-bearish cycle the target. I think of technical analysis as part science, part science fiction. And much akin to astrology, the analysis of what any chart portends is: 1) in the eye of the beholder and 2) relative to where the analysis begins in time and place. The key inflection points in value are only important relative to where the profitable analysis began.
Thus, I instantly negate all opinions from any "expert" who did not get the critical and initial moves correct in the first place! That will not stop the plethora of such "expert" opinions that you will find on a daily basis throughout the financial media. As for GLD I know I got "it" right back in February. I have that quiet confidence to make the next attempt, which in this case is the quest to find the price level for the climax of this GLD bear cycle.
To begin this process I am using the fall period of 2005 when GLD was trading around the $45/share level. Add that 45 to the top hit in August of 2011 of about $185/share. So, $45 + $185 = $230. Divide $230 by 2 to get $115. That is the half-way point between the high and low for GLD over this 8 year cycle.
Remember, I keep things simple. However, I also know enough of the time that the KISS method pays off. As for all the "experts" opining about the bottom you might Google this phrase: "bottom for gold". Read the myriad of opinions that have already erroneously attempted this feat. Most likely what they all have in common is that every one of them did not call the top in GLD (gold).
The $115 level makes trader-sense to me because: 1) 50% retracement over a good deal of time has historical merit; 2) short covering as well as new buying greed should begin to grow roots around that number; 3) new short sellers will probably be positioned in size by then, confident that gold will soon break down to $1,000 (for GLD, $100); 4) the gold miners will probably have dramatically cut new production plans, reducing the overhead future supply; and 5) this bottoming call of $115 as of now has little or no company that I know of.
Note: I posted a trade on GLD yesterday on OptionsProfits on GLD yesterday on OptionsProfits. The trade is a 100% controlled risk trade.
OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits.
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV