The GLD daily chart shows the fund consolidating over the last two months in an inverse head and shoulders pattern, with neckline resistance at the $104 level. That resistance is being reinforced by the 50-day moving average and is the top end of the Bollinger band range. On Tuesday, shares gapped over the neckline, forming a bullish hammer candle and closing near the high of the session.
The recent positive price action was telegraphed by bullish divergences in the momentum indicators. Daily moving average convergence/divergence is overlaid on a histogram of the weekly oscillator and is crossing above its centerline on both timeframes. The relative strength index is tracking above its 21-period signal average and has crossed above its centerline. On the money flow side, the money flow index, a volume-weighted relative strength measure, is above its signal average and centerline, and Chaikin money flow, while still in negative territory is taking out its rising 21-day average.
The GLD is a buy at its current level using a position size that accommodates an initial stop under the right shoulder of the inverse head and shoulders pattern. Taking a countertrend position against a strong primary trend is highly speculative, and the reward strategy should be a quick profit.