A second look at the gold sector. (November 03, 2014)
I want to take a second look at gold and a couple of the stocks here. I mentioned over the weekend that you’re probably going to get a little oversold bounce, not very much of a bounce, not even half of a percent. We’ll look back at the weekly chart; this does look like it’s just kind of trickling lower. Let me just frame the issue, as a long-term proposition, which means anything other than a trader, as a long-term proposition this is not where you want to be because the stock’s drifting lower, by virtually any measure, it’s drifting lower.
Now as a trader, somebody who just trades the swings, this is oversold right now. So if you want to buy gold you can go ahead and do this, GLD ( NYSEARCA:GLD ), or buy IAU ( NYSEARCA:IAU ), which is one-tenth the price. You set your stop right below this low, which was 11.24, so you set your stop at about 11.20 something like that, just a really, really tight stop, now you’re trading. You’re not risking very much money at all in order to trade this bounce.
I think this stock bottomed on Friday, it closed up on the day relative to the open, which is the first time it’s done that literally since back here. It’s just not had that many days where the stock has closed higher than the open, and that reflects intraday buying. So today we had kind of an inside day where the stock traded in the middle of Friday’s intraday range, we don’t know which way this is going to be going.
We’re looking at this and saying, “You know I want to take an oversold bounce trade here.” It’s way outside the lower Bollinger Band here, it’s probably going to extend out here, so the stock needs to at least trade sideways to up, So you take this on a very tight stop and you’re probably going to make money on it. That’s really all I can say, because I don’t know which way gold is going in the short-term; I just know that this, on a technical basis, is very, very oversold.
We’ll look a just a couple others that I had look at and mentioned ( NYSE:AUY ), this is probably a capitulation bottom. Today we got a little bit higher low so look for this to drift up a bit, on a percentage basis, you can probably make a pretty good profit on this. Once again, you keep a stop below Friday’s intraday low of 3.80, so that’s a little over 20 cents you’re risking, 5 percent or so, something like that.
You can make these trades, again, they’re just short-term counter trend trades. Long-term I think that people that are quote “calling the bottom” in gold and gold stocks; maybe they’re going to be right. You can see where we’re getting close here to where it was in 2008 but right now I can’t do that. I can just say we’ve got an oversold bounce, no inflation on the horizon, no particular reason to own gold, but there’s a really good reason to be buying this particular chart and looking for a run up.
Free Chart