Gold has been consolidating since reaching a high near $1,800 per ounce in early October, and MoneyShow’s Tom Aspray goes prospecting for buying opportunities should the yellow metal finally break out of its current rut.
As gold prices have grinded lower from the early October highs and stocks have skyrocketed, the interest in gold has continued to decline. The flurry of bullish recommendations in late September was in sharp contrast to the high bearish sentiment evident last summer.
The high-volume selling last November was a sign that the bears were back in charge and that the correction from the September 2011 highs was not over yet. As I noted in a look at the yearly charts, the Spyder Trust (GLD) did close up 6.84% in 2012 but still it was a disappointing year for gold investors.
Regular readers are likely aware that my long-term outlook for gold prices and the Spyder Gold Trust (GLD) has been positive for many years. Even though there are currently no gold positions in the Charts in Play portfolio, I see no change in the long-term trend.
A look at the monthly chart of gold prices and the weekly/daily charts of the Spyder Trust (GLD) suggests that there will be opportunities for gold investors in 2013 but further patience may be required. Going back to 1976, the seasonal tendency is for gold prices to top in February and then bottom in July.
Chart Analysis: The monthly chart of the Comex gold contract that goes back to 2011, uses the continuous contract that includes volume from all open contracts. The expanded view of the 2001-2002 period highlights the important low in 2001-2002.
NEXT PAGE: Do the Weekly or Daily Charts Look Better?
The well-defined downtrend on the daily chart, line e, from the October 4 highs is now at $164.18.
There has been improvement in the weekly studies as the OBV could move back above its WMA in the next few weeks. As for the daily studies, while another drop is not out of the question, a couple of consecutive higher closes on volume of over 14M shares would turn it positive.
This is contrary to the seasonal tendencies but the technical always take precedence. Therefore, aggressive investors should look to establish initial longs at slightly lower levels and add if further support is tested. For the more conservative, I will look for an entry point once new buy signals are generated.
How to Profit: For the Spyder Gold Trust (GLD), go 50% long at $162.25 and 50% long at $161.66, with a stop at $157.29 (risk of 2.9%). Recommendation tweeted before the opening and should now be 100% long on the opening at $161.24, stop at $157.29.
For a further discussion on using the OBV on multiple time frames, sign up to receive today’s trading lesson.
Editor’s Note: If you’d like to learn more about technical analysis, attend Tom Aspray’s workshop at The Trader’s Expo New York, February 17-19. You can sign up here, it’s free.