Wednesday, September 2, 2009

Gold Looks Shiny

On Wed. Gold saw its biggest daily gain since March and has officially broken out of the tight range consolidation triangle pattern that I have been watching for months. I believe today's breakout on high volume was just the start of a multi month breakout. I can see gold getting to 1150-1200 by year end as I think this is the move that will finally give gold a push thru that 1000 dollar level and this should give it added momentum.

If you take a fibonacci extension from the down move in 2008 as a target you get about 109.5 in the GLD as the 127.2% extension. The second target is up at the 161.8% extension and is 121.5. This would be more of a longer term target looking a year down the road but the point is that gold is going higher and you need to buy some.

I would be a buyer of the GLD on a pullback over the next few days or a bull flag consolidation setup on the 60min chart could offer up a nice entry point. If the GLD can pullback to the the low 95's then I want to be buying some Oct at-the-money calls and selling put spreads in gold miners such as ABX, NEM, GOLD.

The implied volatility of gold miners is more than twice that of the GLD which is why I would rather sell some of that premium in the miners in the form of bullish credit spreads and buy up calls in the etf.

3 comments:

GS751 said...

this was defiantly one of your better posts. Interesting analogy of the gold miner stocks Implied Volatility versus the GOLD index.

Hapi said...

hello... hapi blogging... have a nice day! just visiting here....

Jason said...

Thanks.