Gold and Oil Midweek Trading Report

Gold and silver have been drifting higher on light volume with some occasional waves of selling on higher volume.
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By Chris Vermeulen of TheGoldAndOilGuy.com

NEW YORK (

TheStreet

) - In my last

report

I showed some cycles for the price of gold and how they were starting to roll over which would in turn put some selling pressure on both gold and silver this week.

Last Monday we saw gold and silver open higher but both were met with selling for the entire trading session. Since then gold and silver have been drifting higher on light volume with some occasional waves of selling on higher volume. It looks as though gold and silver have started a 5-14 day pause or pullback.

Gold Exchange Traded Fund (GLD)

You can see from the chart below that the price of

(GLD) - Get Report

looks to have bottomed after completing several typical price patterns from the breakdown we saw in December. The recent 4 months have provided a solid looking chart which should help gold take another run at the $1,500 mark in the coming months.

Crude Oil Futures - 120-minute chart of April 14, 2010

As the saying goes, buy on rumor (expectations), sell on the news. Well, the price of oil moved up in the early morning anticipating the news (inventory numbers) at 10:30am ET would be in line with estimates. Then we saw profit taking started two hours before the number came out which is normal to see. But traders forecast 1.4 million barrels as the number but the number came out at -2.2 million which was a big surprise for everyone. This sent oil sharply higher providing traders who caught the breaking news with an easy money trade. This type of action does not happen often so it's a great little bonus for day traders.

Midweek Trading Conclusion:

In short, metals have had a nice run recently and the charts are pointing to a short breather before the next upward thrust.

Oil is holding up strong on the daily chart and with today's extra boost in price, it's looking like it may want to start a new leg higher if the momentum carries over for a few more days.

We saw the major indices surge higher on rising volume indicating buyers are in a panic to buy in fear of missing more gains. There really is no reason to be buying at these prices other than trading off emotions in fear of missing more upside. The problem for these traders is that money is made by those who buy dips in the bull markets. Buying over extended rallies is a dangerous game, especially with the market as overbought as this one. The trend is our friend and if we do get a 1-2 day pullback in stocks we could take small position to buy on a dip.

USO Oil Fund

-- Written by Chris Vermeulen in Collingwood, Ontario, Canada

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.