Gold Is Set To Collapse
- Posted by TheArmoTrader
- on January 21st, 2012
Alright, so the title might be a little over-dramatic (especially for the short term), but Gold is indeed set up for another down leg here. While I am very cautious when it comes to obvious set-ups, this is just too good to pass on. The risk is very limited (barring no major gap up) and the reward looks to be very promising. If Gold truly does rollover to new lows, we may not see support for a while.
Here is the trade, it is very simple. Short Gold ($GLD) around the ~162 level with a stop above ~163.50. The risk comes out to ~1.50 while the reward can potentially be in my opinion at least 8 points (especially with RSI +80). With a big failure, we can easily see new lows and a test of ~144.00. I still expect Gold to hit 1300-1400 this year, so this setup works perfectly with my thesis. But remember, “strong opinions, weakly held“; Just because I think Gold is coming down doesn’t mean I will be short it 24/7.
Gold Futures ($GC_F) have a very similar look to $GLD. Same type of trade here. Short around ~1675 with a stop above 1700. Interestingly enough, the 38.2% retrace of the all-time high sits right at the trend-line.
This trade setup is almost too good to be true. Everything is nearly setup perfectly for a trade to the downside. However, knowing the market, it will not make this trade easy. I can easily see a scenario where Gold runs stops above 1700 to 1710ish before rolling over, thus frustrating both bulls and bears. I might even end up taking that (overshoot) trade over the one I presented!
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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