By Chris Vermeulen of TheGoldAndOilGuy.com
NEW YORK (
) -- Commodities continue to perform well as the U.S. dollar tests the October lows. If we step back and take a look at the weekly charts of the gold, silver, oil and natural gas ETFs, we can get a better feel for what to expect in the coming week.
Trading commodity ETFs can be a profitable experience when done correctly. The first things I always analyze are the longer time-frame charts. This allows me to see past support and resistance levels and determine whether the investment is trending up, down or sideways.
Let's take a look at gold, silver, oil and natural gas.
GLD ETF: Weekly Chart
The weekly trend is crucial for understanding the power behind price movements. We can see that the gold ETF fund,
SPDR Gold Shares
, is in a strong uptrend and that price closed at the high on Friday, which is a strong sign. I would expect to see gold continue higher on Monday because of this strong momentum.
We can see that over the past two years, GLD has formed a large cup-and-handle pattern, which is very bullish. A breakout above the handle will trigger investors to buy gold as a long-term investment, and that is what we are seeing now.
GLD ETF: Daily Chart for Trading the Trend
Using GLD as an example, the trend has been up for several months on the weekly chart. So we know buying low and selling high is the proper strategy for this investment. The weekly chart (on the first page) shows this.
Buy Signal for GLD
: Using the daily chart, we focus on buying pullbacks when the price is near a support level and reverses back up.
: I am not a greedy trader, so I take profits after a nice run in prices. For GLD, a nice short-term run is 2%-5%. So once I reach that level, I start tightening my stops and trend lines to lock in some gains. I do this by selling part of my positions: Generally between 25%-50%. I let the balance of the position run with the market, providing more wiggle room for GLD to mature.
SLV ETF: Weekly Chart
iShares Silver Trust
has yet to break out above the 2008 high. But the chart is still very strong. If we see the price move above the $17.50 level, I expect buyers are going to jump in and push prices up to the $20 level.
USO Fund: Weekly Chart
United States Oil Fund
continues to look bullish as it consolidates the breakout with volume getting lighter.
We could see a bounce this week, and if we do, I will be watching for a low-risk entry setup.
UNG Fund: Weekly Chart
Gold Rocket Stocks
United States Natural Gas Fund
continues to trend down and underperform the market. The last time UNG dropped to this level, we had a nice bounce, generating a 30% move in three weeks. But I don't think that will happen this time. The price has been sliding lower slowly on light volume. This type of price action is not as predictable when compared to others. I will wait for a proper setup before buying an oversold bounce or shorting after a bounce.
Commodity ETF Trading Conclusion
The weekly charts don't lie. Trade with the underlying weekly trend and you will put the odds in your favor. I use the daily chart and 30 minute intraday charts for timing my trades, as those time frames have proven to be very accurate with commodity ETF investments.
We continue to hold our golden rocket stocks (
) and GLD fund. If the market co-operates this week, we could get some trading signals for both Canadian and U.S. ETF funds.
At the time of publication, Vermeulen was long GLD, SCM.V, ANI.V.
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.