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From the below monthly chart of the SPDR Gold Trust (GLD) we can develop some additional targets for this popular ETF. Using the most recent rally from the 2008 low (point a) to the September high (point b), the 100% target (in black) from the December 2008 low is at $268.12.

Let’s review this calculation: the 2008 low was at $66 and the 2011 high was at $185.85. This difference of $119.85 is added to the December 2011 low of $148.27 to give a projection of $268.12.

Figure 3

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The other way to derive price targets in either an uptrend or a downtrend is to use the corrective periods within the major trend. These continuation patterns can then be analyzed using Fibonacci analysis to generate upside or downside targets, as I discussed in a lesson entitled “Using Fibonacci to Trade Flag Patterns.”

I find this to be a very valuable approach that I often use in my Charts in Play column to determine an initial profit level from the daily charts. When used on quarterly or monthly charts, it can be useful in determining a longer-term strategy.

For example, in the monthly chart of GLD we can use the September 2011 high of $185.85 (point b) and the December 2011 low at $148.27 (point c). The strong recent price action suggests that this low is significant. The 127.2% retracement target from this rally is at $196.  

This value is obtained by taking the difference from point b to point c ($185.85-$148.27, or $37.58) and multiplying it by 1.272. This gives $47.80, which is added to the low at point c ($47.80 + $148.27 = $196.07). This is the next likely upside target for GLD in 2012. The 261.8% target is at $223.43. The monthly OBV continues to signal higher prices.

Figure 4

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Similar analysis can be done using the continuous contract of the crude oil futures. This monthly chart goes back to late 1999. Using the rally from the 2001 low at $17.17 (point a) and the 2006 rally high of $78.40 (point b), we were able to derive some very interesting targets that were hit in 2008.

The 100% level, or equality target, as measured from the 2006 low of $49.90, was at $111.18. This was reached in March 2008. The 161.8% target of $149 was almost reached in July 2008 when crude oil rose to $142.13. Using the same price action, the 261.8% target is at $210.33.

The rally from the 2006 low (point c) to the 2008 high (point d) now gives us an equality target (100%) at $130.57, as calculated from the early-2009 low of $33.20 (point e). The 161.8% target stands at $190.74 (in red).

Crude oil had a sharp correction in 2011 from the high at $114.83 (point f) to the October 4 low of $76.25 (point g). This can be used to calculate the 127.2% retracement target at $127.32. The 161.8% target is at $138.70.

Given the fact that we’re entering a seasonal strong period for crude oil, there are a series of targets ranging first from the 2011 high at $114.83, and followed by $127.32, $130.57, and $138.70. These are the levels to watch in 2012.

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