-- Posted Thursday, 20 August 2009 | | Source: GoldSeek.com
Seasonal Story
The chart below was supplied by The Moore Research Institute.
Prices in August have run high enough to have taken out the high gold made in July. Unless July’s low of 904.8 is taken out, the seasonal chart formation above remains intact and favors an advance in gold later this year.
Monthly Gold Chart
Price action on the Monthly Gold Chart has created what is known as a “triangle pattern”, drawn using “white lines”. Note that each recent low as depicted by the Swingline Study has been higher than the preceding low and each recent high has been lower than the preceding high. This is called consolidation.
This consolidation is taking place over the 18-Day Moving Average of Closes, shown as a red line. I consider the bias to be bullish unless prices close under the 18-Day Moving Average of Closes.
Weekly Gold Chart
The weekly chart has a very different chart pattern than that displayed on the monthly chart. On the monthly chart the Swingline Study is one of higher lows and higher highs. This pattern is bullish and will remain so unless prices get under 925.2.
Daily Gold Chart
What’s different on this chart? It’s that prices are trading under the 18-Day Moving Average of Closes. 949.7 is resistance. The 931-933 price level is where prices have tried to hold.
As you can see, the Swingline Study is making higher highs and higher lows. Until 933.3 is taken out, this pattern stays in place, which favors upward momentum.
The negative is that prices have not gotten back over the resistance, 949.7.
Gold versus the Dollar
Declines in the value of the Dollar are currently supportive to gold. This relationship changes from time to time, but right now it is at work.
Observation
All of the above charts, with the exception of the Daily Chart are bullish. The Daily Chart needs prices to get up and over the 18-Day Moving Average of Closes to join the bullish rank.
Time favors higher prices, at least seasonally speaking.
It seems that a falling Dollar benefits gold. Economic fear is not a driving force just now nor is worry about inflation. Rather, gold seems concerned about the value of the Dollar more than anything else. This will change as it always does, but it’s important to recognize what is supporting prices at this time.
Conclusion
Because of uncertainty over what the Dollar will or won’t do, I think it best to use Call Option Spreads in December Gold.
As I’ve been writing the last two weeks, I like the following two spreads and yesterday my recommendation in to by part of a position in the December Gold 1000 Call versus the December Gold 1025 Call was filled. In my twice daily market updates I split recommended entry points. 50% of positions should have been established with orders in place below the current price of $5.60 to establish the remaining position.
These options don’t expire until late November, providing time and limited risk to catch what I hope becomes a sustainable uptrend.
The key is that volume is light going into late summer. Use that and price weakness to establish these Gold Call Spreads.
The second recommendation I have is to buy long the December Gold 1000 Call versus the December Gold 1050 Call. Currently my recommended price entry is several Dollars under where it is trading.
Given that prices are consolidating, I prefer to use shallow downside corrections, which I do expect to occur to establish these positions.
Updates and specifics on these and other trades are available through my twice daily market reports and daily recorded webinars.
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Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from The Ira Epstein Division of The Linn Group, Inc or The Linn Group, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.
-- Posted Thursday, 20 August 2009 | Digg This Article
| Source: GoldSeek.com
