GLD

[AussieTrader]

Profile:

SPDR Gold Shares represent fractional, undivided beneficial ownership interests in the Trust, the sole assets of which are gold bullion, and, from time to time, cash. SPDR Gold Shares are intended to lower a large number of the barriers preventing investors from using gold as an asset allocation and trading tool. These barriers have included the logistics of buying, storing and insuring gold.

Trading Idea:

Gold and precious metals generally do well when the stock market is weak. Gold has been on a tear these past few months, hitting an all time high back in April and since then pulling back and consolidating some 15 to 20% off the highs. With the overall equities market in a weakened environment having exposure to Gold especially as it looks set to breakout from consolidation makes good sense.
My view is that Gold will soon re-challenge all time highs, so with that in mind and using the ETF GLD we are able to position ourselves into Gold Bullion without the issues of physically owning the material itself.

Technical Analysis:

The GLD chart presents a nice technical setup. Since March GLD has been trading in a range from $84 to $94, and most recently finding $92 a tough ceiling to break (coincidentally $92 equates to a 50% Fibonacci retracement from the March 17th highs). This consolidating period has been characterized by higher lows and strong support, I fully expect that $92 ceiling to be broken to the upside allowing an eventual re-test of the $100 zone.

Note: The price of GLD is constructed on 1/10th of an ounce of Gold.

Fundamentals:

The following web link will take you to the SPDR Gold Shares information

Home: http://www.spdrgoldshares.com/sites/us/

And yes we actually have a picture of the Gold Bullion held in trust for us, now that makes me feel better!!

We will introduce a stop for this trade on Wednesday.

Trading Plan:
Buy GLD at or around the open

[AussieTrader]

Update:

GLD indeed broke out above the resistance area we discussed in our trade justification. With the general markets looking for a bottom and perhaps attempting to re-bound and Gold looking technically strong at the same time, in the near term both those outcomes are usually incompatible with each other.

I would like to see that $92 zone now become good support for GLD and set up a move to challenge the highs once more.

Today as promised I will introduce an initial stop which will be quite loose whilst we see how Gold and the markets react at their current levels.

Trading Plan:

HOLD GLD with a STOP at $85.00

[AussieTrader]

Update:
With the general markets looking for a bottom and perhaps attempting to re-bound and Gold looking technically strong at the same time, in the near term both those outcomes are usually incompatible with each other.

Well, yesterday equities lost that battle.

Update:

GLD is hovering just below $94 and the same level as the swing highs of April 16th and 17th. Breaking through this area will further confirm our plan.

I am showing the weekly chart that confirms the resistance in question. No change to the trade plan today.

Trade Plan:

HOLD GLD with STOP at $85.00

[AussieTrader]

Update:

Gold (and consequently our GLD position) is still consolidating below the $94 resistance area.

Very interesting is the following:
' The most actively traded call option on the Chicago Board Options Exchange is on the SPDR Gold Trust, an exchange traded fund that invests in gold bullion. This is remarkable because it is only a month since the options began trading, following a landmark joint decision by the Securities and Exchange Commission and the Commodity Futures Trading Commission'.

Seems many US managed funds are using GLD to access commodity exposure which normally they are not allowed.

For the full new item here: http://www.ft.com/cms/s/0/8c5a7df0-4bc1-11dd-a490-000077b07658.html

The premise of the trade remains the same, GOLD will appreciate as equities come under more selling pressure. No change to the trade plan.

Trade Plan:

HOLD GLD with STOP at $85.00

[AussieTrader]

Update:

GLD had a nice volume uptick Thursday which pushed it right up to the previously identified resistance area around $94.

Looking at the GLD chart a case can be made from a technical analysis perspective to see a cup with handle formation in play. The premise of that pattern being a strong uptrend (1 on chart) has been followed by a significant pullback and consolidation period, that consolidation period forms a sort of rounded cup shape (U shape. A on chart starts cup, B on chart bottom of cup)) and following the consolidation on diminishing volume it forms a 'handle' in the upper area of the right hand side of the cup (C on chart which equates to the $94 area). When it breaks above that identified high then you often get volume and momentum that leads to new highs being formed.

William J O'Neill (of Investors Business Daily fame) documents and recommends the validity of this pattern in continuation trading.

A break of $94 as I have previously discussed will lead us to challenge and eventually take out the $100 highs. If you are not yet in GLD, using the break of $94 might be a good time for entry.

No change to the trade plan today. I will re-assess the stop over the weekend and bring it upwards to meet logical support areas.

Trade Plan:

HOLD GLD with STOP at $85.00

[AussieTrader]

Update:

Nice volume continuation and breakout confirmation for GLD today, this confirms the $100 highs will now be in range. GOLD / GLD is definately under heavy accumulation as the overall equities market continues downwards / saps confidence. The best technical outcome would be a re-test of the $94 breakout zone before advancing to the $100 level, but I won't be fussy if that doesn't occur!

It is worth looking at the SLV chart (ETF which tracks price of silver) it is trading very much in parrallel to GLD as both metals set up to challenge all time highs.

I will adjust our stop upwards now that we have confirmed the breakout. It will be placed just below the July 8th pivot low and just outside some key medium / longer term moving averages. The new stop is at $89.40

Trade Plan:

HOLD GLD with NEW STOP $89.40

[AussieTrader]

Update

Update:
The best technical outcome would be a re-test of the $94 breakout zone before advancing to the $100 level, but I won't be fussy if that doesn't occur!

GLD pulled back in the wake of a strong day for equities. Lets see if a re-test of the breakout zone occurs over the coming days. Weekly chart displays this nicely.

No change to the trade plan.

Trade Plan:

HOLD GLD with STOP at $89.40

[AussieTrader]

Update:

Gold tested the support area I previously mentioned and reacted positively from it. Technically it has done exactly what I wanted. The weight of evidence still points to $100 (on GLD) will be in sight very soon.

I will re-asses the stop once GLD closes to new highs (in the $96 zone). No change to the trade plan.

Trade Plan:

Hold GLD with a Stop at $89.40

[la-onda]

chart update (GLD now close to the stop  )

[AussieTrader]

Update:

Yep Gold has done a complete about turn in the past 2 trading sessions in sympathy with increasing $ strength, decline in oil, decline in commodities. I had thought about closing GLD yesterday, but wanted to allow the market price action to decide which direction this will ultimately go.

We have the trade on a tight stop and where the stop is placed should give enough leeway to allow a bounce to occur here (if indeed it will happen). A break of that zone I think would lead to significant downside follow through.

At this stage we can only wait and see. No change to the trade plan.

Trade Plan:

HOLD GLD with STOP at $89.40

[la-onda]

I didn't know that you can short ETFs..

GLD: Short Interest UP 21.0% to 11.4M in Mid Jul 2008
Thursday , July 24, 2008 16:48ET

According to new short interest data from NYSE, short interest for streetTRACKS Gold Trust (NYSE: GLD) INCREASED 21.0% to 11,387,179 shares as reported in mid-July, 2008.
Based on GLD's 20-day average daily share volume of 16,589,557, it would require approximately 1 day(s) of buying to cover this short interest.

[AussieTrader]

Update:

Hey La-onda, yep you can short pretty much anything!! We have been using inverse ETF's to gain profit from downside action, but you can just as easily sell short the ETF tracking the index / sector / material as well to gain the same outcome.

Overall I am thinking we will still see further downside from equities, and oil could find support and hold / rally some. Because that is my over-riding view I want to leave our GLD trade as it is to see what the markets tells us.

GLD has been finding good support just above $90 which coincidentally equates to the 38.2% fibonacci retracement (as you can see on my chart). No change to the trade plan.

Trade Plan:

HOLD GLD with stop at $89.40

[AussieTrader]

The market has spoken on this trade. Equities are rallying for the moment. Metals are out of favour.

Stopped out of GLD $88.86