Monday, August 22, 2011

Market Watch: GLD

On Friday I said that we would probably have to go long on GLD by at least 25 shares. Then I didn't do anything about it. The reason why is given in the chart above. It actually is the chart above. When you see a chart like that you simply do not enter long positions, you close them out. In fact that is what we did at $170. We were Long on GLD from $155 to $170, but then I got spooked by the chart and we got out. After that we got burned by going short, but I can tell you now I would much rather go short on this index than long. I do not think by any stretch of the imagination that the gold run is over. But we member how we got out of SLV at $45 per share. It didn't seem like the right thing to do at the time but it turned out to be. Point is wait for a pullback and an entry point.

Having said that I doubt were going to get very big pullback. It probably won't even go back as far as the first Fibonacci retracement. But most of the time stocks crash from run-up like this just like silver did. I don't care if we get a pullback by five dollars. I would rather wait until then, until it's much safer before piling in to GLD here.

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