Editor’s note: Serge Berger, the head trader and investment strategist for The Steady Trader, will be providing the Trade of the Day until Sam Collins returns on June 27.
SPDR Gold Shares (NYSE: GLD) — There are numerous reasons investors buy and hold gold. They are often looking for diversification or a hedge against geopolitical unrest, the sliding U.S. dollar, inflation or deflation. And the trade I am looking at today is on the popular gold exchange-traded fund (ETF) GLD.
As we all know, gold has been in a huge uptrend. GLD traded around $40 in 2004. Earlier this year, it peaked at $153.61. That’s an almost 285% move in less than seven years.
Since late 2008, GLD has traded in a fairly steep upward channel, the top end of which was tested in early May.
From early November 2010 to early April 2011, GLD consolidated and carved out a picture-perfect inverse head-and-shoulders pattern that gave way to a quick and sharp rise in April. In late April, the price of GLD almost exactly hit the price target of the inverse head-and-shoulders pattern.
Since the silver crash in May, GLD has been somewhat out of the news, but has slowly worked itself higher. On June 6, it found resistance at $151.50. A few days later, it found support near the rising 50-day simple moving average (yellow line). Yesterday, GLD traded above $151.50 intraday, but closed at just about $151. I see decent potential that GLD will break out higher soon.
The trade: Open GLD long between $151 and $151.50. I think this trade has to be given some breathing room and, as such, I would place a trailing stop at the 50-day simple moving average (yellow line) with a first target at $155 and second target at $160.
