Wednesday, January 11, 2012

Gold Back In Play

Gold (GLD-ETF) confirmed its move back above its 200 day moving average today setting the stage for continued gains in the coming weeks. What makes this move even more impressive is that it happened during a period of EUR/USD weakness.

In mid-December gold broke below its 200 day moving average for the first time in almost 3 years, causing traders to liquidate long positions and analysts to declare the bull market in gold over.

However, selling the break of an UPWARD sloping moving average can be a dangerous play, especially on the first attempt. A look at the longer term chart shows that the trend is clearly still up.

Being long gold via the GLD ETF is a great risk/reward play here with a stop back under the 200 day moving average on a closing basis. The 200 day ma should come in around 158.75 tomorrow. However it would take a break below the long term channel support of 148.50 to be able to truly call the bull run over.

I went long today at 159.14.

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