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Gold Rebound Will Likely Continue

ByIgor Rakhmanov
Published 07/04/2013, 03:07 AM
Updated 07/09/2023, 06:31 AM

The recent plunge in Gold has created a good trading opportunity in my opinion.
GLD
Here is the daily chart of SPDR Gold Trust Shares (GLD) covering the last 3 years. In the indicator window I placed PPO (1,63). The Percentage Price Oscillator (PPO) is a momentum oscillator that measures the difference between two EMA as a percentage of the larger moving average. On the GLD chart you can see PPO (1,63) which measures the difference between EMA (63) and EMA (1). I have EMA (63) on my charts computing the average price of a security over a quarter. You can see, that 15% mark in the indicator window represents an extreme in the PPO (1,63) readings over this period. On Jun 27 PPO (1,63) fell below 15% mark the second time over the last three months. Historically, it should lead to the mean reversion. It can be resolved by a sideways price action or a rebound. Taking into account the increasing volatility I am leaning toward the latter.
GLD 2
On the daily candlestick chart a Bullish Engulfing Pattern was formed on Jun 28 on high volume – a short-term reversal pattern.
GLD 3
And now, last but not least, a Long Tail Down pattern was formed on my medium horizon P&F chart. A Long Tail Down is a column of Os with twenty Os at least. A 3 box upside reversal gives a buy signal.

Note that GLD is in the long-term downtrend. I consider a potential rebound only as a short-term trading opportunity.

I bought a calendar call spread today. If GLD stays below 125 to the end of this week, the sold weekly calls will expire worthless.

Bought to open GLD Aug13 125 call 10 contracts at $2.24
Sold to open GLD 05Jul13 125 Call 10 contracts at $0.09

Disclaimer: I express only my personal opinion on the market and do not provide any trading or financial advice (see Disclaimer on my site).


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