Chart of the Day – Gold No Longer Glitters, GLD Breakdown

by Enis July 12, 2012 11:43 am • Commentary

I like to make money.  I have almost no other objective when I trade.

Don’t get me wrong, I thoroughly enjoy the game.  I like to predict what will happen in markets.  I like to wade into the waters with the best minds in the world.

But at the end of the day, my objective is to make money.  And as crazy as it sounds, we should all constantly be reminding ourselves of that objective.  Because too many traders fight battles and make emotional stands in the market when THEY SHOULD NOT CARE.  Just focus on making money.  Make your emotional stands outside of financial markets.

Today’s topic is gold, represented by GLD.  GLD and AAPL are probably the 2 most emotionally traded assets in the world today.  Even when I hear debates about gold, it’s rare that people don’t approach the topic with preconceived emotions and beliefs.  I don’t care about any of that.  I’m here to make money.

GLD looks very close to a short-term breakdown of the all-important 148 level in the next couple weeks.  Here’s the chart:



GLD is close to retesting the 148 support level for the 5th time since December.  It sports a declining, 20, 50, and 200 day moving average.  The most recent rally from 150 was shallower than the rally in May, and the more times support gets tested the weaker it gets.  Moreover, the dollar is at a higher level than at any point in the last 2 years.  I view gold as an alternate currency, and as the dollar rallies, it’s appeal as an alternative currency becomes weaker.

In short, I think a break of that 148 level is coming soon.  I bought the Jul 20th expiry 150 puts in small size this morning as a way to play for a quick breakdown in the next 6 trading days.  I think it’s either going to happen soon, or GLD will likely bounce again, and I’ll take my small loss.  But GLD is now on my radar, as it seems prepared for a big move soon.