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Bill L.
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Methodology: setups require certain criteria to be met before trades can be executed, which include weighted statistical studies on several indicators of price, breadth, volume, and sentiment . Amount of risk taken is proportional to how many indicators are aligned. I mainly trade market... More
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  • Monday, March 25, 2013 - Long Some Gold 4 comments
    Mar 25, 2013 6:35 PM | about stocks: GLD, SLV, UUP

    Summary:

    While the stock market is off in la-la land, I've been looking for more reasonable risk reward setups, more specifically right now I'm long some GLD.

    Originally this idea was flagged to me by Sundate36 in the comments section, here is the original article is recommended reading.

    Commitment of Traders:

    Looking at the most recent commitment of traders report, commercials have been going long gold for several weeks now as the GLD approached some decent looking horizontal support.

    So clearly while the public has been losing faith, the bookies of the futures world had some faith in gold finding some sort of a foothold.

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    Notes: The basic oscillators hit oversold while price entered an area of horizontal support. Furthermore the Gold COT revealed that commercial hedgers had been increasing their net position, while small speculators have been giving up on gold.

    Seasonality:

    Furthermore, in terms of seasonality February tends to be very negative for Gold, with performance improving in March, and going positive into April. If we get another soft patch in the summer, that could present another good buying opportunity into the fall months.

    (click to enlarge)

    Other Notable Notables:

    • According to Sentimentraders public opinion indicator, public opinion recently dropped to the lowest level visible on the chart (going back to 2007). It has since improved a tad, but remains at very low overall levels.
    • According to Hulbert Financial Digest, news letter writers have also turned negative on gold, and are now recommending a net short position in gold. This however tends to work better as a contrarian indicator, and these low levels have historically been a bullish sign.
    • According to Rydex, the assets in precious metal funds has fallen to historically low levels.

    Summary:

    The risk reward in gold is skewed enough for me to try a long position in GLD, I'm long until we start to see some of these indicators reverse, and I'm out if we break below the green area of support in the first chart (around 147 in the GLD).

    -Bill L.

    Stocks: GLD, SLV, UUP
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Comments (4)
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  • basehitz
    , contributor
    Comments (1550) | Send Message
     
    Bill,
    Agree with going long here

     

    Regarding seasonality favorable now, this post from the weekend reinforces that thought
    http://bit.ly/11GYPc4

     

    On CoT positions, this post expands thought. I have opted to go with miners instead as author notes:
    “And despite the gold bearishness spiking to silly levels in recent weeks, that seen in gold stocks utterly dwarfs it. Just this week the flagship HUI gold-stock index sunk to levels last seen 43 months ago in August 2009!”
    http://bit.ly/ZqiXLu

     

    More on gold mining stock sentiment capitulation, as author calls it the worst he’s seen in 12 years of trading PM:
    http://seekingalpha.co...

     

    However. . . the gold chart looks like it wants to retest lows. Will take some fortitude to not be shaken out. . . And I do think Da Boyz are trying to shake out the last stubborn holders before whipsawing higher to undo the extreme sentiment positions.
    26 Mar 2013, 09:49 AM Reply Like
  • Stilldazed
    , contributor
    Comments (2046) | Send Message
     
    While I agree that precious metals (and hard assets) seem to be the best place to be right now. Paper gold (GLD) and even miner stocks are only paper (or electronic ticks) in the systems. As Cyprus has shown, if you can't touch it, you don't own it.
    26 Mar 2013, 05:16 PM Reply Like
  • sundate36
    , contributor
    Comments (288) | Send Message
     
    That's an interesting pair trade you have going, Bill. GLD is too expensive for me. I've been trading in and out of $HMY (while keeping a portion as a long position). Please keep us posted on your GLD trade, if you decide to add/exit, etc. Good to see your blog again!
    27 Mar 2013, 03:57 PM Reply Like
  • sundate36
    , contributor
    Comments (288) | Send Message
     
    Bill - what do you think of today's "wash" in gold and gold miners?
    3 Apr 2013, 04:04 PM Reply Like
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