RobertSchaefer
Short

Repeat of 2013 GLD Crash - Updated(3/9)

BATS:GLD   SPDR GOLD SHARES
- TL;DR: GLD             in descending triangle similar to that of 2011- 13. Expecting up to 25% decline over next 6 months.
- Trade: Short, Limit Cover half @ $98 and half @ $85, Stop Loss @ 124.5 (8%) -OR- Jun 30 113.00 Puts trading $2.91, BE $110

After nearly three years of uninterrupted gains, beginning in late 2008 and ending in late 2011, GLD             set a high water mark at $185. Over the next year the etf settled into a clear descending triangle pattern, the base of which measured roughly $37 or 20%. The $151 support was shattered in early April giving way to a roughly $37 or 25% decline in less than three months. This accounts for a measured move of 1.0(nominal measure of base).

Again we find ourselves low in the tail end of a descending triangle , after four consecutively lower highs. Oddly enough the base of this pattern measures $28.5, again another 20% measured base. A full measured move would take GLD             to roughly $85, down 25%, coincident with '08 - '10 support. Interim support to be found around $97. Remember the first half of the year is typically seasonally weak for gold             prices, the last crash occurring on the threshold of March and April.

Additionally consider that gold             has a particularly loyal set of investors; they love to buy the dips and psychological supports( at least from what I can tell). So on one hand this absolutely bolsters the current support, on the other hand it leads to interesting circumstances. Below this current price level the volume at price drops off relatively sharply, until about $100. When you see heavy accumulation at a given price support with a volume pocket below, it creates vacuum conditions and usually leads to capitulation if the support is broken. These same conditions existed and, I believe, contributed to fast drop in '13.

If you're a gold             bug, it would be prudent to maybe hedge your position with some puts.
If you're looking to short, here might be your catalyst.
Regardless of where you stand, best of luck.

Update (10am: 3/9/15) -
Main support has been broken, but two intermediary supports remain for the short term. The first is $111.50, which I will give moderate attention to. The second is at $109.90, which should be the last strand. Otherwise I believe the trade is on. Cheers. If you follow currencies check out my related DXY             idea.

Technician TOP
2 years ago
Great work, thanks
+1 Reply
CosmicDust
2 years ago
Definitely a possibility that deserves attention. Oct 2006 and Oct 2008 has similar pattern but managed to go higher. Understood that the main trend is still down slope.
Reply
usamah.mughal
2 years ago
Interesting observation; however, I would say the '08 - '10 resistance is more plausible than the 25% drop you're suggesting. I would still accumulate gold at US41,200 an ounce.
Reply
usamah.mughal usamah.mughal
2 years ago
I meant US$1,200 - can't edit my previous comment! :)
Reply
JigneshRathod usamah.mughal
2 years ago
agree with you...at 1150 ppl will start jumping like crazy. Now as market is bullish with greece news of 4 month extn, $ will get weaker so GLD might go up....you dont know indian and chinese ppl....they will jump on Gold like crazy and China is for sure accumulating gold since 1 yr. this is another opportunity for them.
Reply
RobertSchaefer usamah.mughal
2 years ago
I happen to agree with both of you. Caveat: Unfortunately I do not have pro, so my chart is missing volume at price information but using other software you can see strong volume associated with this price range. Gold has a particularly loyal set of investors and as you both mentioned; they love to buy the dips and psychological supports( at least from what I can tell). So on one hand this absolutly bolsters the current support, on the other hand it leads to interesting circumstances.
Below this current price level the volume at price drops off relatively sharply, until about $100 on GLD. When you see heavy accumulation at a given price support with a volume pocket below, it creates vacuum conditions and usually leads to capitulation IF the support is broken. These same conditions existed and, I believe, contributed to fast drop in '13.
This is just a premise of course, but its one Ive used in the past. Cheers, and thanks for the thoughts.
Reply
JigneshRathod RobertSchaefer
2 years ago
another -ve i can see is once Europe QE will start next month then gold might sink further. but tought o tell what support level it will hold. Last month gold shooted up w/o much reason...it may be short covering but there wasnt any strong news to bring it up stil it shot up. I saw huge 145 and 130 calls for Jan 2016. so i feel long term game is still bullish but i am stuck with some miners investment which will go down further if gold goes down from here. Lets see.
Reply
usamah.mughal JigneshRathod
2 years ago
European QE means gold will go up in Euro terms; regardless, I'm comfortable buying gold between US$1,150 and US$1,200 range for selling in the next 2 to 3 years. Or, for selling in ranges between US$1,250 and US$1,300 within 1 year.
-1 Reply
PinnyC PRO
2 years ago
Gold had expectations for new highs with the Swiss polls proposal, until they were rejected.
The way I see it we are at a critical point: the price is testing a support level at the $108-$112 range, we've last seen this support in midMay/10 to midAug10. Price "tested" this support last year and rebounded.
A negative thrust from Oct 12 to Apr 13 defined a target of $95 so we may well be on our way there but have to cross the support range (I'm using P&F for long term forecasting) that re-established itself since ~Nov 13.
A Put protection to this point is a very good idea
Thanks.
P
+1 Reply
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