Some emails today about entries. I personally only trade gold on a very short timeline with a small percentage of my portfolio. I use option strategies with GLD and do not attempt to time entries in physical bullion or PHYS (Sprotts Physical Gold Trust) where the vast majority of my holdings are. With that said, I know some are concerned about strategic buys. I posted the following on my blog:
Gold broke 1800 today. Unfortunately from a technical aspect one must consider the risk level for potential long entries at this point. Support is the last swing high and the Fibonacci 38.2% retrace level near 1680. A long entry cannot be considered wrong until price drops below the previous swing low at 1644. The risk is nearly $150, yikes! From a fundamental aspect, the case for gold couldn’t be stronger. Buy and hold investors should not be concerned regarding entries because we are close to the end of the gold move in time, but nearer the beginning in price. Gold is going much higher and $150 is inconsequential.
For those who want a strategic buy, perhaps waiting for the inevitable reaction impulse lower will offer an opportunity. I tend to look at the weekly chart to identify potential entries for this purpose. Notice how corrections follow short term swing highs on the chart highlighted in yellow. The RSI study shows a floor for the correction between 50 and 60. Stochastic cross (blue arrows) of the slow line by the faster line is an indicator of reversal and leads price action. Probably the most telling indication of reversal from a correction is where price settles in relation to the most common moving averages. Notice how corrections reverse at or near the 18 week moving average (dotted gray) and never go as far as the 45 week moving average (blue). the current 18 week moving average is at 1555 and moving higher with a steep trajectory. The last major swing high just above this level and looking at this chart it is clear that previous swing highs are not violated to the down side, so I consider the 1580 level to be the floor and more or less unattainable. I am thinking 1600 plus may be more likely as correction target.
So how about a stochastic cross in conjunction with price approaching at or slightly below the 18 week moving average and RSI approaching the 50-60 level? The only turd in the bowl so to speak is that the trend has been violated to the up side and we may not get back to levels that have given good buy signals in the last 3 years. But that is the essence of risk in this market, being caught out in cash when the big moves come.