Trade Idea: Long GLD

Monday, May 11, 2009

Current Trade: Enter GLD Long @ $90.30 with stop @ $84.90 for maximum 6% loss.

I was stopped out of gold on April 6, 2008 as my stop loss was hit at $86 but I have continued to watch the commodity. To me, this trade is just a matter of time and I have been patiently waiting for a compelling re-entry. I believe that time may have come.
The fundamental rationale for this trade is quite simple. I believe the Federal Reserve's actions throughout this recession have severely debased the US dollar. Trillions of dollars have been printed and inflation seems to be the only outcome once the economy begins recovering.

Technically, the trade has been setting up for a while. In my previous post on gold, I explain some of the longer-term technical patterns but more recently gold has pulled back off the $1,000 level retest for a 50% retracement of the $300 move. The pullback found support at the previous downtrend break coinciding with the 50% retracement level. The double bottom at this level confirms strong support and indicates a possible move higher. This level should hold going forward and a trade can be entered through the recent highs at $90.30 with stops placed below the recent support at $85. This trade offers a maximum risk of 6% and a possible high reward. Expectation for reward is a move through the $1,000 level and prices upwards of $1,500.

This trade is not a recommendation of a buy or sell transaction. The trade may or may not be entered by TWS Investments. This website is not intended as an advisory service.


Post a Comment