Gold Trapped in Sideways Trading

Ilan Levy-Mayer |

Recently, I have been asked the same question by many clients: "What do you think about gold?" The reason for the question is the uncertainty with Greece along with the volatile currency markets which usually pushes gold higher, but that has not been the case so far. So to answer the question, I did what I usually do...I opened my charts and looked for clues.

First, I opened the weekly chart. It's a Heiken-Ashi type (in my opinion, the Heiken-Ashi type of chart helps "smooth out noise" when it comes to longer term charts).

GCE___Gold__Globex___Weekly_Continuation__Delayed_by_10_mins__Heikin_Ashi.png

What you see here is a very wide trading range on the weekly - over $250 in range. We got both buy and sell signals over last nine months, but no major move developed. The latest signal on the weekly points up.

I then opened a daily chart, as seen below:



GCE___Gold__Globex__Equalized_Active_Daily_Continuation__Delayed_by_10_mins__Heikin_Ashi1.png

On the daily chart, we see a bit of conflicting signal, with the latest one pointing down.

At this point, I classify gold as range bound with possible bottoming action, and I will wait for a break out before committing to one side or another. I would like to see a break above 1205 followed by a break above 1226. On the short side, 1169 needs to be taken out before the shorts gather additional momentum.

What does one do in between?

  • Sit on the sidelines.
  • Buy longer term vertical spreads if they have an opinion on the market.
  • Sell shorter term options on both sides (calls above 1230 and puts below 1150) - again selling naked options involves unlimited risk. Read more.

Many ways to trade any market, many ways to lose money in any market and only very few ways to lock in gains - this one is not different. If you need help creating a trading plan, visit our broker assist services.

 
 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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