Key Daily and Weekly Price Level to Watch Closely on Gold GLD

Jan 10, 2011: 2:53 PM CST

Gold – and it’s popular proxy ETF GLD – has come into a very interesting technical (chart) level right here on both the daily and weekly charts as we begin 2011.

For investors and traders in gold/GLD, it’s a good idea to be aware of these levels and the IF/THEN chart contingencies these create if the level holds… or breaks.

Let’s start with the Weekly GLD Structure and then slide down to the Daily:

The ETF has doubled in price since the ‘pit’ of the Financial Crisis that inflamed around October 2008 – then, GLD traded at the $70 per share level (gold was at $700 respectively).

Now as we begin 2011 with much better economic circumstances, gold has doubled to the $1,400 level and as you can see GLD neared the $140 level recently.

Interesting, but what now?

After an extended rally, GLD is showing signs of weakness in the form of obvious negative momentum divergences as a slight “arc” pattern has formed in price.

Right now, that’s a big CAUTION signal, but not yet a panic signal by any means.  It’s a glaring non-confirmation, but price (and trend) is superior to any indicator.

Turning now to price, the objective level to watch on the weekly chart is the $130 price level, which is currently the rising 20 week EMA ($131.36 right now to be exact).

In the event that price holds the weekly EMA support, then the divergence is ‘broken’ or ‘busted,’ and the rally will likely continue beyond $140.

HOWEVER, a firm price breakdown under the key $130 level targets an immediate swing back to prior resistance which will – by that time – form a confluence with BOTH the rising 50 week EMA (blue) and lower Bollinger Band – a key level to play for at $125 in the event sellers push gold under $130.

So that’s the MAIN IDEA from a simple chart perspective – monitor what happens now at the $130 level (support – yes or no?) and then IF support breaks, then we could see a retest of weekly support at $125.

With that in mind, let’s see the additional details the daily chart reveals:

I always suggest you build a ‘thesis’ first on the weekly (or even monthly) chart and then monitor – for confirmation/non-confirmation – the details/data that emerge in real time from the lower frames (such as the daily chart for a key reference).

That being said, the chart picture doesn’t look good for Gold/Gold right now – of course that could change suddenly, but right now, the picture is of non-confirmation and caution.

Why?

A little “Three Push” pattern – complete with visual negative momentum divergence on each recent price push to the $139 level – has undercut the recent bullish trend.

Divergences are CONCEPTS or COMPONENTS that help us create a narrative – but again it’s down to price for official signals.

Turning right now to price, the signal is that price is currently under the rising 50 day EMA – a fate that hasn’t happened except for a little nip under (with support just above the 200 day SMA as expected) in July (when stocks bottomed).

The key DAILY level to watch is around $134 – which is setting up to be a (bearish) crossover of the falling 20 day and flattening 50 day EMA – which would be expected to hold as resistance.

So if buyers push price BACK above the 50 then 20 day EMAs – clearing back above $135 – then the picture turns back to the bullish camp.

BUT UNTIL THEN, it’s probably best to take a more cautious posture, particularly if sellers push the price down through the prior daily support swing lows as labeled where we are now, at $132, and then the BIG one at $130.

In other words – and as I show with color bands in my weekly reports – it’s perhaps worth taking a:

neutral/cautious (see what happens) stance while price is between $130 and $135;

a bullish “trend resurgence” stance above $135 (immediate target $140);

but a more bearish stance on a firm break of both Daily and Weekly support at $130 (target the weekly $125 level).

As a reminder, we never know the future, but rely on objective price levels – and confirmation/non-confirmation from key indicators and volume – for our decision-making and opportunity/risk management.

I’ll be discussing more about trade execution tactics of patterns and structure  (what signals actually trigger trades from an aggressive and conservative standpoint, for example) in a presentation on “Trade Execution Tactics” at the New York Trader’s Expo – February 20 – 23.

I really enjoy the Expos and traders of all experience levels benefit from attending and networking and I hope you can join us all there!

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

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4 Comments

4 Responses to “Key Daily and Weekly Price Level to Watch Closely on Gold GLD”

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  2. Brian Says:

    Thanks for the commentary Corey. I thought about picking up GLD calls at the end of trading today but changed my mind after reading your post and taking a second look at the technicals. I will put GLD back on the watchlist for now!

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  4. Gold GLD Still Standing on Precipice of Chart Support | Afraid to Trade.com Blog Says:

    […] 14, 2011: 2:34 PM CST I wanted to give a quick chart-based update to my prior post this week “Key Daily and Weekly Price Level to Watch in Gold GLD” which goes into a bit more detail than this quick […]