By Chris Vermeulen of TheGoldAndOilGuy.com
So far this week has been generous, with our commodity
s moving higher, other than natural gas, which is clearly in a bear market. Each one of the commodity ETF trading charts here is at a different stage. It will be interesting to see how things unfold in the coming weeks.
Trading ETFs is very rewarding when done properly; using multiple time frames to plan your entry and exit points is crucial. My main focus is on the weekly and daily charts, but I use a 30-minute intraday chart when the time comes to actually pick an exact buy or sell point. I have provided both the weekly and daily charts, so you can see how the same ETF looks completely different in the two time frames.
Gold ETF Trading
The weekly chart shows a nice multimonth rally, but
SPDR Gold Shares
is now starting to go parabolic (straight up). When this happens, I start tightening my stops so that I can lock in maximum gains. Now jump over to the daily chart and notice that gold has rallied longer than the previous move in early October. It looks overbought and ready for a pullback.
Pullbacks on strong rallies like this tend to be hard and fast, as stop orders get triggered, sending prices tumbling down on heavy volume. My general thought is, five days up in an investment is given back in one down day. This is why I scale out of positions when they are looking long in the tooth and ready for profit-taking.
Silver ETF Trading
iShares Silver Trust
had been underperforming gold for several weeks, but made up some nice ground this week.
and silver tend to trade together, so if gold pulls back, I figure silver will also. That being said, the weekly chart of silver looks ready to rocket higher for another week or so.
USO Fund Trading
While gold and silver have been moving higher, oil has been flagging sideways, taking a breather. Both the weekly and the daily charts of the
United States Oil Fund
are aligned for a nice move higher, if the trend and charts follow through on their patterns. We could get some tradable action in the next couple days.
UNG Fund Trading
Natural gas is really starting to slide. Wednesday the
United States Natural Gas Fund
dipped below the Sept. low of $8.94 by a couple cents, then moved up into the close. Overall it's not bullish. This could be the start of a waterfall selloff, which is a sharp heavy-volume selloff that lasts three to five days.
Commodity ETF Trading Wrap
To sum everything up, the gold and silver ETFs are on fire as they continue to surge higher. Being ready for a sharp reversal is important, if you want to lock in gains on a portion of your position.
Crude oil is taking its time, but looking ripe for a breakout higher. We continue to watch for some action.
Natural gas continues to get pushed down and it's not looking good for higher prices anytime soon. We are waiting for a shorting opportunity or an oversold condition to play a one- to five-day bounce.
Quick Trading Tip
: If you have a position that has done well and has moved up for an extended period of time, be sure to draw some trend lines and tighten your stop, or set a stop, under a tight trend line. Sell some of your position (25%-50%) to lock in gains and let the core position continue to mature. If you get a pullback to a support level (previous breakout level), you can buy back your other part of your position at a lower price.
At the time of publication, Vermeulen was long GLD
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.