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Bruce has been involved in the financial markets for over 20 years as a trader, analyst, trading educator and financial writer. Core expertise is in the areas of investing, trading, technical and fundamental analysis, as well as corporate development and strategy. Bruce writes a weekly column... More
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  • GLD, The Gold ETF, May Have Found A Significant Bottom 0 comments
    Jan 14, 2013 9:28 AM | about stocks: GLD

    The SPDR Gold Trust (NYSEARCA:GLD) continues to show signs that it wants to go higher. Is it close to an upside move now, or might further declines come first?

    There are similarities in the charts of GLD when compared to SLV (see recent SLV post). What you will notice is that the behavior of GLD is reflecting a bit more strength when compared to SLV. The long-term trend characteristics of GLD have held up better over the past year-and-a-half correction phases.

    (click to enlarge)

    GLD moved into a corrective phase after hitting a record high of $185.85 in September 2011. It eventually found support at $148.27 in December 2011, completing a 20.2% decline. Contrast that drop to SLV, which fell 48.6% after hitting its record high of $42.78 a month earlier.

    GLD subsequently tested that support area in May 2012, creating a second bottom at $148.53. Around that time it hugged support of its weekly 100 period exponential moving average (ema) for approximately 10 weeks before rallying. SLV fell all the way to its 200ema on the weekly chart before finding support during its correction.

    The significance of the $148.27/.53 support area for GLD is strengthened by the inclusion of two Fibonacci retracement levels measured from the more recent prior up trends, as well as the 10-week test. Keep a close eye on the weekly 100ema in the future as it is also an important indicator for long-term support. Eventually GLD rallied off that support zone to well above its long-term downtrend line, a bullish indication.

    (click to enlarge)

    Since hitting resistance at $174.07 in early-October 2012, GLD has been in a correction. That correction includes an AB=CD pattern where the second leg down matches the first leg at $158.24. So far, support has been found at $158.39, the recent low, which also completes a 61.8% Fibonacci retracement ($158.29) of the prior rally. Also, a potential double bottom has formed on the daily chart. A breakout of the double bottom is indicated on a move above $164.14. In other words, there is reason to believe that GLD may have found a long-term bottom which could be followed by another strong leg up.

    Alternatively, a daily close below $158.39 will likely see GLD drop to the $155 to $154 support zone, consisting of the weekly 100ema and 78.6% retracement, respectively.

    (click to enlarge)

    There are two potential target zones identified on the above daily chart. The first is from approximately $177.81 to $178.46, the 78.6% retracement of the long-term downtrend, and the 78.6% projection of the first leg up off the $148.53 bottom, respectively. Higher up is potential resistance from approximately $183.93, the 78.6% projection of the first leg up off the May 2012 bottom, and $185.85, the record high from September 2011. (

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: GLD
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