Trading Ideas for Gold and Oil

06/14/2010 10:38 am EST

Focus: COMMODITIES

Gold: Daily Chart

Gold futures prices continue to form the large cup and handle pattern and are trading near resistance. This week, I figure we will see gold make a move up or break the dotted support trend line and drop towards the blue support level. I continue to wait for a low-risk setup for gold.


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Crude Oil:  Daily Chart

Crude oil has been trending down for a couple months and recently rebounded to test its resistance level. It looks as though oil is forming a bear flag, which generally means we should see lower prices in the near future. But another $1-$2 move up could trigger a surge of buyers if this resistance level is broken, which is why this week should be volatile. There’s a 50/50 chance for commodities to either rally or sell off.


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S&P 500: Daily Chart

The S&P 500 has posted some decent gains the past couple days, but it’s still not in the clear just yet. Most technicians are looking for a move above the 1100-1110 area with heavy volume before they start to commit serious money to the long side.

It looks and feels as though the market could drop or rally very sharply from here, and if you are caught on the wrong side of the move, it’s going to really hurt your trading account. During times like this when the market is at a critical pivot point with increased volatility levels along with mixed market internals, I tend to stay on the sidelines until some dust settles.


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Gold, Oil, and SPX Trading Conclusion

In short, everything is trading near key pivot points, giving mixed signals for prices to rally or drop. My analysis is pointing to a small move up Monday morning to break Fridays high, followed by some selling late Monday or Tuesday. How much of a move down I don’t know for sure, but there is potential for a 3%-4% move. On the flip side, if buyers step in to push the price above 1100, we could see a surge higher of 3%-4%.

Very dicey times right now to be trying to pick a direction, which is why it’s best to wait for the risk level to diminish before getting involved, or at least trade a small position with a protective stop if you feel confident about a direction.

By Chris Vermeulen of TheGoldandOilGuy.com

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