Post-Election Breakouts to Trade: Apple, GLD, SLV, USO, and IWM

By Chris Vermeulen  NOV 07, 2012 11:35 AM

The big question is: When will gold and Apple shares bounce?


Over the past two months shares of gold (SPDR Gold Trust (NYSEARCA:GLD)) and Apple (NASDAQ:AAPL) have had a sizable bite taken out of their share price. Active traders along with longer term investors have had a wild ride this fall watching these investments slide to multi-month lows. The big question is: When will gold and Apple shares bounce?

Here we are again with another election behind us and Barack Obama in the White House again. Many think this means four years of the same things: printing, inflation, and higher stock prices.

Is this good or bad for Americans, or the world for that matter? It doesn't much matter since there's nothing anyone can do about it now. So buckle your seatbelt and focus on trading and investing on major trends both within the United States and abroad, using exchange traded funds.

Currently the broad stock market and commodities are in a full-blown bull market, so the focus should be to buy the dips until proven wrong. Below are some charts showing the important breakout levels for Apple, metals, oil, and key indexes like the Russell 2000 (INDEXRUSSELL:RUT).

Be aware that during pullbacks that last more than a month, which is the market has done, some of the biggest drops in price happen just before prices bottom. Scaling into positions is the key to minimal drawdowns.
AAPL Stock Chart

Shares of Apple clearly show the down channel which must be broken before investors start buying again. This stock seems to have big potential for $650 to be reached quickly. If Apple shares rise, so will the overall stock market.

Gold Spot – GLD Exchange Traded Fund

During August and September investors flooded the gold market in anticipation of QE3. Since then gold has been drifting lower with profit taking and because of some slowly strengthening economic numbers in the USA. Gold looks ready for a run to $1800 but may stabilize here for a few weeks first.

Silver Spot – iShares Silver Trust ETF (NYSEARCA:SLV)

The price of silver moves similar to that of gold. While the charts look the same, silver is highly volatile and can super-charge your portfolio when metals rally.

Crude Oil Spot – United States Oil Fund ETF (NYSEARCA:USO)

Crude oil has been correcting for a couple months as well and still has a lot of work to do before a new uptrend is triggered. Currently oil is trading in the middle of its trading range, but once the price breaks above $93 per barrel, a good investment fund would be USO.

Russell 2000 Small Cap Index (NYSEARCA:IWM)

Small cap stocks typically lead the broad market in both directions. They are the first to rally and the first to rollover and sell off. The major indexes like the Dow (INDEXDJX:.DJI), S&P 500 (INDEXSP:.INX) and NYSE (NYSE:NYX) have not formed clean chart patterns, which is why my focus is on the Russell 2000. Small cap stocks are now showing a rising relative strength compared to the S&P 500 large cap stocks and this is very bullish for stocks in general. The best way to trade this index is through the exchange traded funds IWM and Direxion Daily Small Cp Bull 3X Shs ETF (NYSEARCA:TNA).

Post-Election Trading Breakout Summary:

In short, history shows that equities tend to rally after an election. For a detailed outlook of how to trade stocks and indexes during the election cycles, be sure to read my report, The Election Cycle – What to Expect in Stocks & Bond Prices.
Editor's Note: Chris Vermeulen offers more content at his sites, and Traders Video Playbook.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.