Gold Needs to Breathe | Bulls on Wall Street

Gold Needs to Breathe

Gold done for the week?

 

As you know, gold and silver (and pretty much all the metals) have been booming over the last few weeks. It’s been a very impressive run with the miners benefiting huge. August saw massive moves in all the sector leaders, as well as most of the laggards, but is it time to take a breather? 

 

Don’t get me wrong, gold will likely continue to trend up through the end of the year, if history repeats itself, but I’m more interested in the very short term – say, next week, or so.

 

Here is why I’m looking for a temporary pullback in gold.

 

GLD is currently testing recent highs with bearish divergence on MACD Histogram and fading 10 point Momentum. However, I wouldn’t say that it is necessarily overbought here – RSI14 and Slow Stochastics are both high and looking a little heavy, but not in the overbought range. We also haven’t seen a blowout volume. Today’s hammer candle may indicate a possible reversal – it’s a glaring warning sign on the daily.

 

GDXJ has gone ballistic over the last two weeks on strong volume and better than a 45 degree incline. Today’s candle posted an inverted hammer that could turn this puppy around just like GLD. Slow Stochastics are overbought and turned south slightly today and RSI14 is clearly overbought with momentum through the roof. Yes, if volume keeps up, we could still add more to the upside, but today we saw fades in a lot of miners and it feels like the sector is temporarily heavy.

 

FCX – FCX isn’t quite as overbought as some in the sector, but it’s always a good one to watch for direction. We did see a general fade that lasted all afternoon with overbought Slow Stochastics. This will be interesting to watch tomorrow. 

 

Summary… and what I’m looking for:

 

Concerning the 3 above – I want to see GLD pull back to SMA20, GDXJ to 30.70 and FCX to the SMA200 range. From there, we’ll see some support sector wide an new opportunities should present themselves to go long. Until then, I’ll look for a few miners that are way overbought and pick up a few short positions. Again, this is a very short-term outlook. I like gold higher through the month, but day trading is about positioning and risk management. I, for one, don’t want to chase gold at these levels for the rest of the week. Let them breathe.

 
Hope I don’t get left behind 🙂
 

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