Fools Gold

Since the 4th quarter of 2011 investors have seen gold prices crash almost 40% from $1,800 per ounce down to almost $1,000 an ounce as recently as last week. Investors can't seem to find a bottom in the commodity sector, as the US Dollar sees unprecedented strength following US GDP growth and a tightening fiscal policy from the Fed. However, as we near the end of the year we are seeing recognizable buying strength in the commodity. Over the last two weeks I've been eyeing Gold and the Gold-related trading vehicles and noticing that buyers are stepping back into the market on heavy volume. It is too early to tell if this the end of the commodity demise, however from a technical analysis point of view we are seeing some strong buy signals across the board.
Let's check out some charts and see what we have:
The last two weeks for the SPDR Gold Trust (ARCA:GLD)we have seen hammer candles. Both of which are coming in at the bottom of their broadening formation and are extremely strong buy signals.
Additionally, we can pull up the Direxion Daily Gold Miners Bull 3X Shares (NYSE:NUGT) and notice a similar pattern. Here we have back to back weekly hammer candles as well. The last two weeks have have traded almost 100M shares per week, the highest volume in over 3 years. This is setting up for a huge move in the coming weeks.
If we take a look at some of the Gold Mining companies around the globe, they also are setting up beautifully. Yamana Gold Inc (NYSE:AUY) and Alamos Gold Inc. (NYSE:AGI) are putting in back-to-back weekly hammers as well, with last week being an inside week. Goldcorp Inc (NYSE:GG) was inside weekly hammer two weeks ago, and with a 6% day on Friday put in another weekly hammer.
With all of these things being said, nothing is a sure thing. It is imperative to keep tight stops in these positions, as they have been absolutely demolished this year. For full disclosure, I have been accumulating NUGT shares and option contracts over the last few weeks, but it's imperative to have our thesis be confirmed. For me, that means seeing NUGT trade over last weeks high of 14.25 and stay above it. I believe that NUGT could see $20 a share by the end of the year and possibly over $30 into Q1 of 2015. We'll see if it plays out.

Happy Trading