Gold Potentially Retracing, Prepare to Buy Long
Updated
Technicals:
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$16.03 and $16.61 are approximately the short term support and resistance levels, forming a channel where the price is being pulled horizontally. This area also appears to be a price consolidation point around $16.38 following an April 20th high volume day.
Fundamentals:
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Gold is trending up. This momentum is due both to the medium term high VIX volatility and an overall pattern of prices rising after a market correction/downturn event. This correlation of gold to volatility and market correction follows a similar pattern from 2006 to 2011.
Strategy:
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Longer term call options are ideal for the current market. Purchase 3-month long call options if IAU breaks through $16.60 or if it retraces to $16.03.
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$16.03 and $16.61 are approximately the short term support and resistance levels, forming a channel where the price is being pulled horizontally. This area also appears to be a price consolidation point around $16.38 following an April 20th high volume day.
Fundamentals:
------------------
Gold is trending up. This momentum is due both to the medium term high VIX volatility and an overall pattern of prices rising after a market correction/downturn event. This correlation of gold to volatility and market correction follows a similar pattern from 2006 to 2011.
Strategy:
-----------
Longer term call options are ideal for the current market. Purchase 3-month long call options if IAU breaks through $16.60 or if it retraces to $16.03.
Comment
The market has already returned to its early March prices, effectively completing a 10-15% price correction. From this point forth, many stocks that have returned to similar levels will be trading in a more rational response to fundamental performance. Earnings reports, market reactions, and basic trends will be more important than the overall bullish attitude.Disclaimer
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