By Chris Vermeulen, founder of the Gold and Oil Guy.com
fund has performed as expected. Push to a new high then sell down.
Generally, I would expect this move down to test my support level or trade near that level, but because we are heading into the holiday season and volume is light, the market has a natural tendency to drift higher. I'm sure that is why it's still trading near the high.
This new yearly high was enough to suck in breakout traders, and only time will tell if they get follow-through or get shaken out of this trade. Oh, the joys of buying a breakout in an overbought market condition.
Gold Exchange-Traded Fund
fund broke down sharply from its trend channel and has settled into a support zone. Wednesday we saw a nice bounce, but the question is, is this a rally or a sucker's bounce?
I've found the best setups and moves occur after an A-B-C retrace. The black lines on the chart show exactly that type of price action. These retraces shake out most short-term traders before starting a new rally. There is a thin dotted blue line showing a possible resistance trend line that would need to be broken after the retrace pattern has formed, if we want a low-risk setup with a sizable win/loss ratio.
iShares Silver Trust
is in the same boat as its big sister (yellow gold). We just need to wait for a high-probability setup to present itself before putting any of our hard-earned money to work.
USO: Crude Oil Fund
The U.S. Oil Fund
has provided some great short-term gains for anyone who used my analysis from my Sunday night report. The quote below covers my thoughts on USO.
"Oil broke down out of its bull flag last week and is currently testing both trend line support and horizontal support levels. We could see a short-term bounce here to the $37, $38 or $40 levels. Taking money off the table at each resistance level and raising your stop is an important money management strategy I use for this type of play."
UNG: Natural Gas Trading Fund
Natural gas (
U.S. Natural Gas Fund
is still very much a speculative play, as many expect to make huge money from this commodity.
This likely means two things:
1. It's still headed lower.
2. After rallies, the sellers jump back in.
UNG is trading near resistance, and it could provide a great shorting opportunity in the coming days.
Conclusion: Although it's been a quiet week in the market, I have really enjoyed it. Not sure if it is related to everything unfolding in a controlled manner or the holiday season nearing, or maybe both. The U.S. dollar has made a nice move in the past couple weeks. Although it has broken out of its down channel, I think there is a lot of short-covering going on making this bounce more powerful than others.
Also it is important to note that it is near resistance which could dampen things around the $77-$77.50 level. If the dollar heads back down, I expect gold to start making a move back up, which it started to do Wednesday.
November and December have been quiet for our ETFs, but I know we are on the verge of either a large move up or down in the coming weeks. Let's watch the market and funds unfold and see if we can get another trade or two in before year end.
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Chris Vermeulen is founder of the popular trading sites www.thegoldandoilguy.com and www.ActiveTradingPartners.com. There he shares his highly successful, low-risk trading method. Since 2001 Chris has been a leader in teaching others to skillfully trade in gold, silver, oil, and stocks in both bull and bear markets. Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.