The Long and Short on GLD
streetTRACKS Gold Shares
Oct 23, 2006
Currently, traders are equally
divided between the bull and bear camp, both with very convincing
arguments why this and why that. Naturally, that is what makes
a market. I have received many emails lately, and most of these
folks are neither bulls nor bears, they are simply confused.
Keeping it simple is easier said than done, and keeping it simple
is precisely what we do.
First, we look at the long
Yes, the bull market is alive
and well. In fact, prices can drop tomorrow all the way to $38
($380 gold) and it will not change a thing. The configuration
is bullish, and long term investors buy when prices find support
at either the 50 or 200ema. This is the essence of our trading
model. It is not a question of if, but when this will happen.
All prices eventually test these EMA support/resistance, in all
time frames. But don't take this as advice to short the market,
we do not execute trades on the monthly charts.
Then we look at the intermediate
term. Weekly GLD is on a sell signal, with prices currently testing
50ema support. If successful, we will have a buy signal here,
although we will probably have bought when that happens, using
a shorter time frame. If support fails, a test of the 200ema
support will be next. Again, do not short the market based on
this intermediate term outlook, we only execute trades on the
daily chart, next.
The daily chart is our short
term time frame and where all of our trades are executed on.
We had a buy signal on 10/13 at $58.57, and we will stay long
until support fails.
We have made 40% profits on trading GLD so far this year, and
part of that success is due to the fact that we ignore the noise
and focus only on price action. We do not hold long or short
hoping for some of those outlandish price targets to be reached
some time in the future. We live and trade the now, and gold
is currently struggling at the $600 level. If support holds,
we may see a 10 to 15% profit potential from our current set
up. If support fails, we are testing the June low and the longer
time frame will come into play. We follow price action and will
go with the flow, money flow that is.
End of report
Oct 21, 2006