business newsGold Set to Rally?
By
Schaeffer's Investment Research
Nov 07, 2012 10:04 am
GLD offers an attractive risk-reward.
PRINT
-
Stay Connected
-
-
-
-
The SPDR Gold Trust (NYSE:GLD) had itself quite a day yesterday, rallying more than three points, or just over 2%. A couple observations have caught my eye, and makes me lean bullish into year end.
For example, the pullback in the GLD that began in early October was contained at the 320-day moving average. Yes, I know, a very odd moving average, not popular among technicians. But, note how this trendline marked a key bottom in late-December 2011. And, after a break below this trendline in May 2012, the GLD went sideways for three months, as the 320-day moving average marked a short-term peak in June.
Also, per the second chart below, note in late-October how the 20-day buy (to open) option volume began increasing from low levels. I have noticed that during the past few years, when buy (to open) option volume is increasing on the GLD, gold has fared well. And when buy (to open) volume is decreasing, GLD has either declined or traded in a range. My theory is when buy (to open) GLD option volume is increasing, it is evident that bulls are in accumulation mode, using GLD calls to speculate on higher prices, or GLD puts to hedge a long futures position.
GLD offers an attractive risk-reward, as you can target $185, the September high, and close your position if GLD trades back below its 320-day moving average.
GLD With 320-Day Moving Average – Plus, Trendline Breakout
Click to enlarge
20-Day Buy (To Open) GLD Option Volume
This article by Todd Salamone was originally published on Schaeffer's Investment Research.
Below, find some more great content from Schaeffer's Investment Research:
Chart of the Day: TASER International Inc. (TASR)
Peabody Energy Traders See More Upside Ahead
Hewlett-Packard Targeted for Bullish Bet
Twitter: @schaeffers
For example, the pullback in the GLD that began in early October was contained at the 320-day moving average. Yes, I know, a very odd moving average, not popular among technicians. But, note how this trendline marked a key bottom in late-December 2011. And, after a break below this trendline in May 2012, the GLD went sideways for three months, as the 320-day moving average marked a short-term peak in June.
Also, per the second chart below, note in late-October how the 20-day buy (to open) option volume began increasing from low levels. I have noticed that during the past few years, when buy (to open) option volume is increasing on the GLD, gold has fared well. And when buy (to open) volume is decreasing, GLD has either declined or traded in a range. My theory is when buy (to open) GLD option volume is increasing, it is evident that bulls are in accumulation mode, using GLD calls to speculate on higher prices, or GLD puts to hedge a long futures position.
GLD offers an attractive risk-reward, as you can target $185, the September high, and close your position if GLD trades back below its 320-day moving average.
GLD With 320-Day Moving Average – Plus, Trendline Breakout
Click to enlarge
20-Day Buy (To Open) GLD Option Volume
This article by Todd Salamone was originally published on Schaeffer's Investment Research.
Below, find some more great content from Schaeffer's Investment Research:
Chart of the Day: TASER International Inc. (TASR)
Peabody Energy Traders See More Upside Ahead
Hewlett-Packard Targeted for Bullish Bet
Twitter: @schaeffers
No positions in stocks mentioned.
Daily Recap
Everything you need to know for the next trading day.
Trading Radar (weekly)
Your road map to all the events that will effect financial markets in the week ahead.
Name
Email
*
Phone
* required field
