Is Gold Ready To Rally Again?

23/06/2011 Uncategorized  No comments

gld close up

 

We have all heard the numerous reasons to buy and hold gold.  They include:

Hedge against geopolitical unrest

Hedge against the sliding dollar

Inflation and deflation hedge

Diversification

…and many more

The trade I am looking at and hence the charts here are on the popular gold etf; GLD

It’s no secret and the media certainly hasn’t been shy talking about it that gold has been in a huge uptrend.  Looking back to 2004, the GLD traded around $40 and earlier this year peaked at $153.61.  That’s about a 285% move in just around 6.5 years.

 

Since late 2008 the GLD has traded in a fairly steep upward channel, the top end of which was tested in early May.

 

From early November 2010 to early April 2011 GLD consolidated and carved out a picture perfect inverse head and shoulders pattern that gave way to a quick and sharp rise in the GLD in April.  In late April the price of GLD almost exactly hit the price target of the inverse head and shoulders pattern. 

 

Since the silver crash in May, GLD has been somewhat out of the news but has slowly worked itself higher.

On June 6th GLD found resistance at $151.50 and a few days later found support near the rising 50 sma (yellow line).  Yesterday the GLD traded above $151.50 intraday but closed just about at $151.  I see decent potential that GLD will break out higher soon. 

 

Here is the trade I am considering:

Open long between 151 and 151.50.  I think this trade has to be given some breathing room and as such would place railing stops at the 50 day simple moving average (yellow line), a first target at $155 and second target at $160.   

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