Friday, July 06, 2007

Head And Shoulders Bottom In Gold

The other day I posted that I'm looking to get long gold due to the overwhelming amount of bearishness towards this metal.

Above is a chart of GLD and as you can see this ETF is forming a head and shoulders bottom. I'll be looking to get long GLD on a buy stop when Monday's high is taken out which is around the 65.30 area.

I would like GLD to consolidate for a few more days to give this head and shoulders bottom a more symmetrical look which I think is important, but I'll still take the trade if GLD rallies above Monday's high.


Andrei said...

I havent done my reseach yet, maybe you have, but how closely correleted are the gold stocks to gold... like oil stocks to the oil contract. Lead/lag time, beta?

Kevin said...

Gold stocks tend to move with the price of gold. The only time gold stocks might not follow gold is if the stock market makes a large move. You have to remember that gold stocks are still stocks and they are influenced by movement in the stock market...but for the most part, gold and gold stocks move together.

Deborah said...

I think you will be in for a big surprise with that analysis that gold stocks will continue to move with the price of gold.

Recently gold stocks are under performing with respect to the price of gold in term of their earnings and there are strong fundamental business reasons for that.


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