Gold prices broke out Wednesday and traded above $940/ounce. This is a new 6-month high! In my article last week, on 2/4/09, I said:
"We'll wait for GLD to confirm that $88 will hold. Above $90, we should see more buyers coming in. March in-the-money calls are reasonably priced. AEM is another good vehicle to play gold. Although it is very volatile, it is a momentum stock and can run up fast!"
GLD successfully tested $88 and closed above $90 on Tuesday. On Wednesday, it jumped on high volume, more than twice the average volume!! GLD closed at $92.29, up +2.31%. AEM also did well, gaining +6.58%, or $3.48, finally breaking above $55.
click to enlarge
GLD
GLD added $2.08 to close at $92.29. It jumped on very high volume Wednesday. It closed just below the resistance at $92.5. This is only a soft resistance. The nearest hard resistance is between $95-$97.5.
Compared to the stock market, which had been treading water in a tight range since November last year, GLD had done much better. We can see a big divergence in this comparson chart:
The SPX has basically traded flat. On the other hand, GLD has risen nearly +30%, from $72 to $92!
GLD's chart is still very strong. Its daily MAs are curving higher and still holding a bullish formation. The MACD is also turning up. I think GLD can easily revisit $100 within the next few months, which means gold can retest $1,000, and likely go above. Again, March "within-the-money" calls are reasonably priced. If GLD goes to $100 within the next few weeks, these options will probably double.
Good day and HappyTrading! ™.
Disclosure: no positions
