Man, you can’t turn on the TV or hit a financial website without someone talking about gold. Geeze. For years, it was just something you put around your neck to hang on your chest hair or used to strap a rock to your lady friend’s finger. These days, there are commercials from companies wanting to buy your class ring and a thousand blogs giving you numerous reasons why you need to have gold in your portfolio and not just on your teeth.
I also know, as a trader, that I cannot predict the future. Everyone talks about long term diversification to protect you against the what-ifs of the world. I’m not a big fan of that philosophy and would rather manage what’s close to me – in other words – I want to diversify my portfolio on a daily basis when I KNOW what’s going on. My investment strategy involves preparing myself for various short term scenarios and then jumping on the one that plays out.
OK – back to gold. I don’t care where gold is going in 6 months. I don’t care about its correlation to the overall stock market, oil, etc. What do I care about? Where is gold going tomorrow and where are the best opportunities (miners, etc.) to profit from on the move. So, I’m reducing the noise by looking at gold related charts and playing them if they are setup. boom – that’s it.
The big chart – I always start with GLD. I base all of my trades in this sector on GLD (kind of like FCX for copper). If GLD is setup, I’ll look for gold trades. I rarely trade GLD – why? gap ups and there are better places to scalp.
Take a look at the chart below. Right now, we’re in sell pattern. One of two things is going to happen.. GLD will reverse on SMA20 (where it sits now), or will likely fall to 104. Look at the MACD, RSI14, and Full Sto. All pointing downwards with room to go. Notice how the Full Sto tops out and tends to run all the way down below 20 before recovering. I would actually prefer this since it would be at historical support levels. We’ll see. My guess is GLD falls through SMA20 and heads towards 104. 
1) GLD reverses back up at SMA20 – I’m taking a SMALL position in one of the following on reversal off support. I will ADD to that position if GLD moves through 110 (above loose channel). From there, base the exit and targets on the stock I’m trading.
2) GLD runs down to 104. If we see these levels, we’ll likely see Full Sto below 20. This is what I would love to see. If we see support at these levels and a reversal in GLD, I’m adding full position in one of the below (whichever chart looks the best).
silver and gold related:
HL
SSRI
SLW
NXG
GSS
NG
HMY
AUY
That’s all. Now I can ignore the noise… work with the Bulls community… and find the best movers based on this simple approach.
See you in the Boom Factory.
