In this blog, we are going to discuss gold. Gold prices peaked in September of 2011 and has been in a bearish down trend until the end of 2015. Then gold began the first leg up in January of 2016. Gold futures and GLD, gold ETF, are up 18% since the beginning of 2016. After the initial burst in January gold prices have been in a consolidation period. If you look at the chart below it is easy to see this price consolidation. Which is also the quiet period before the Simpler Trading Squeeze fires. The red dots show when the squeeze started, which was on March 14th. During this time the momentum moved to the downside, red bars, and now has moved to the positive side, cyan bars. This is why you do not want to jump into a trade too early. If you had taken the short trade when the momentum moved to the downside, before the squeeze fired, you would have just been chewed up and more than likely stopped out for a loss. Now the squeeze looks like it will fire long, if it does it could be the start of the second leg up, and may be the beginning of the next bull market for gold.
One thing that I have noticed, is that the gold mining stocks and ETF’s have been outperforming gold, which had a great run the first quarter of 2016. GDXJ, which is a gold mining ETF, is up over 80% since the beginning of the year. The Simpler Stocks Trend Trading system has had several winning trades this year in GDXJ. The last trade we entered the same day the squeeze fired long, and was out in 2 days for a 10% profit. We had another setup but priced gapped up on the open and we did not chase it. Do not chase trades. There will be other trades to take. If you missed a trade and it is in a strong trend you could sell credit spreads. Put credit spreads for a strong up trend and call credit spreads in a strong down trend.
Some other gold mining ETF’s are GDX and NUGT. Just understand that NUGT is a leveraged ETF and much more volatile than trading GDX or GDXJ.
No one on the financial shows like CNBC and Fox Business has really talked about the move in gold this year. Why?
I hope this was helpful.