Last Friday’s August jobs report came in below analyst expectations; however, markets reacted in a fairly muted fashion. But gold — as represented by the popular SPDR Gold Trust (ETF) (NYSEARCA:GLD), measured on a weekly closing basis — left behind a bullish reversal candle last Friday at a critical technical support juncture.
Active investors and traders now have a well-defined line in the sand against which to trade the GLD on the long side.
One of my mentors used to remind me on each jobs report Friday that the market’s first reaction isn’t always a true reaction. As such, any price action we saw on Friday — including in gold and the GLD — still could be subject to a reversal this week.
When I last opined about gold on Aug. 17, I mapped out some levels where investors should watch gold and the GLD ETF for a potential bullish reversal. At the time, the intermediate-term trend remained higher. Specifically, I said that if the GLD could overcome $130 or a significant bullish reversal came through, a next leg higher could unfold.
GLD ETF Charts
The multiyear weekly chart of the GLD shows that the June breakout past the orange-dotted diagonal resistance line remains intact.
While the weekly MACD oscillator remains at lofty levels, the yellow 50-week simple moving average is just beginning to break above the blue 100-week average.
More importantly, however, was last week’s bullish reversal on the weekly chart. On this next chart note the long tail on the weekly candle, which we can now label a bullish hammer candle. The way I like to read such a candle is that sellers tried their best last week to push the GLD ETF lower, but by week’s end, the bulls took over. This bullish reversal also took place at the red 200-week SMA, which is to say that previous resistance now became support.
On the daily chart, note that the uptrend in the GLD ETF remained intact last week as the lower end of the trading channel (red dotted lines) held. Last week’s lows around $124.60 also coincided with horizontal support as marked by the blue shaded area as well as the rising 100-day SMA.
So, last week’s bullish reversal in the gold ETF took place at a key confluence support area in multiple time frames. Active investors and traders could use this as a signal to get long the GLD against last week’s lows as a last-resort stop. Use $130 as a first upside target.
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