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Trade of the Day: Another Buying Opportunity in the GLD ETF

Few global assets have performed better over the past twelve months than the price of gold. The bullish trend remains our friend in the SPDR Gold Shares ETF (NYSEARCA:GLD). From a trading perspective, the GLD ETF is setting up another bullish opportunity.

gld etf

Source: Shutterstock

Over the years in this column I have spent considerable time and effort educating investors and traders alike about the importance of applying a multi-time frame approach to analyzing the markets.

Understanding an asset’s time and place in multiple time frames allows for proper perspective and thus gives you the necessary risk management parameters for the trade or investment in question. In other words, letting a losing position turn into a giant loser, or taking profits much too early on a winning trade, is largely reduced as a result of having proper perspective.

When I take a step back from the frantic day-to-day flickering ticks on my screen, I note that the current backdrop is about as good as it gets for a bullish trend to continue in the price of gold and in the GLD ETF.

The combination of negative economic growth, little-to-no prospects of inflation in the near-term (but plenty of risk of bad inflation down the road), and monetary debasing (central bank money printing) in record amounts is by historical context bullish for the price of gold.

GLD ETF Stock Charts

gld etf

Source: TradingView

Starting off with a longer-term multi-year chart, we see that the GLD ETF on the weekly chart, from 2013 through the first half of 2019, formed and traced out a bullish ‘inverse head and shoulders pattern.’ I marked this with the three green half circles.

This was then followed by a notable breakout move that has remained steady in recent weeks, despite the fresh ‘risk-on and everything is awesome’ bid that risk assets have enjoyed.

From this angle I would expect the GLD ETF to reach the $180 area, and possibly much higher at some point in 2020.

Source: TradingView

Zooming in on the daily chart we see that in the first half of April, GLD had a nice little breakout that since then led to a consolidation phase. This consolidation phase now looks ripe to resolve higher again soon, all within its bullish long-term, intermediate-term and short-term trend.

Active investors and traders at this juncture could look to buy the GLD ETF in the $160 – $163 area. A next upside profit target is $168 and a stop loss at $156 could be utilized. Any strong bullish reversal following a stop-out would be another buy entry signal.

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