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The weekly chart of the Spyder Gold Trust (GLD) shows a broad triangle or flag formation (lines a and b) that goes back to July 2011.
- GLD has closed below the 20-week EMA, which is currently at $163.08 and a close above the mid-January high at $164.40 would be a positive.
- The quarterly pivot is at $165.51 with the downtrend (line a) at $170.60.
- The weekly OBV dropped back below its WMA in early December, which was a sign to protect profits on longs.
- The OBV tested support in early January, line d, that goes back to October-December 2011.
- The OBV has turned up and a move back above its WMA would support the view that the correction is over.
- The OBV has major resistance at the downtrend, line c.
- There is initial weekly support at $160 with further at $158.39-$159.15.
The well-defined downtrend on the daily chart, line e, from the October 4 highs is now at $164.18.
- There is initial support now at $162.20 to $161.75.
- The chart shows that the 61.8% Fibonacci support from the May-June lows is at $158.21.
- The equality or 100% target that was calculated from the October high to the November low is at $158.24.
- The low on December 20 was at $158.39.
- The daily OBV briefly violated its uptrend, line g, in December that goes back to the June-July lows.
- The OBV is now just slightly above its downtrend, line f.
- A move in the OBV above the December high should confirm a daily bottom formation.
- The 50% Fibonacci retracement resistance is at $166.23 with the 61.8% resistance at $168.08.
What it Means: The signals from the monthly analysis are the most reliable and though it may seem unlikely now, I would still expect gold and GLD to make new highs in 2013.
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.
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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.