Yamana: Thinking Trades in Gold

Investing is not only about finding the right stock or asset class, but also finding good entry points. This is especially true of a volatile asset such as gold. Knowing what timeframe you want to invest in is also critical, as gold often shakes out weak hands in the short-term right before huge upside moves.

For Yamana Gold Inc. (AUY), notice how MACD has been a good indicator of both uptrends and downtrends. Currently, MACD is approaching the signal line and is suggesting a potential trend change. Wait for confirmation of a cross between MACD and the signal line before entering this trade. Longer term investors should use this opportunity to accumulate more shares.

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Ultimately, AUY will track the price of gold. In addition to a bullish inverse head and shoulders pattern, a cup and handle pattern is forming in gold. The convergence of these two indicators adds to the bullish case for gold. Furthermore, gold has found good support in the 30 day moving average. The short-term outlook for gold will change if this average is breached, so keep an eye out for it.

As a slightly bearish factor for gold, declining open interest implies we may be in for some whipshaw action before gold really takes off. Also, stocks are showing weakness, which recently has precipitated a "safe haven" trade to the dollar. My firm belief is that money will start flowing to gold instead of the dollar in the next downturn, but only time will tell. Nonetheless, by keeping an eye on key indicators and waiting for confirmation to enter trades, you can be assured of being on the right side of the trade more times than not.

Disclosure: Long AUY

Comments

[rick12345:]

Gold's rather lacklustre performance at the moment must be due to the fact that california is about to go down the drain???? Somebody please explain to me what the hell is going on.

Jul 06 07:53 AM

[Moses Kim:]

rick,

All corrections are a gift. In the bull market of the 70's, gold actually declined by 50% at one point before taking off. It's when people start losing hope that gold starts moving.

Jul 06 09:26 AM

[DmytrenkoArtem:]

Moses Kid , you look very young on foto.. Its really cool to research markets with pleasure and details in so young age as you do. I began from 18. Now i am only 20. I am critic much this post, as its dont tell about anything what is really rules asset. But, anyway, keep this way! You will be really good!

Jul 06 09:42 AM

[DmytrenkoArtem:]

But maybe i were mistaken about your age :D

Jul 06 09:44 AM

[secmaven:]

As long as JP Morgan Chase is on the job gold will go nowhere.

Jul 06 01:28 PM

[Moses Kim:]

Shorts have to cover sooner or later, no?

Jul 06 01:51 PM

[Northstar10000:]

If you look carefully you will see. A sideways move across the top just wants to break out. When it does, explosion time.

Jul 06 09:22 PM

[Danny N:]

short gold in short term, and long gold in long term, my personal opinion

Jul 06 10:16 PM