The GOLD Dec 70 Calls (GUDLN) I recently recommended to OptionsZone readers hit my $6 target, netting you at least a 130% profit if you got in below my buy under price of $2.60.
I think the bullish trend in gold is going to continue, so we need to position ourselves in some new plays. These plays are not ready for an entry as I type this, but they very well could be by the time you read this.
I will go over the specific of the plays in just a moment, but first we need to review the actual price action in gold. An expected price move to at least the spot $1,100 per ounce level seems like a reasonable pattern target on the daily chart in the medium term.
You can see on the daily chart below that we broke north out of a symmetrical triangle, but on the weekly chart we have yet to break out of the ascending triangle.
The ascending triangle breakout is going to be the “big move” in gold. What we’re currently seeing is just a little appetizer breakout, a small sampling, if you will, of the gains we will be making by trading this sector.
Daily Gold Chart
Weekly Gold Chart
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The three plays in the gold sector that look to have the best beta for options are Randgold Resources Ltd. (GOLD), Royal Gold (RGLD) and Goldcorp Inc. (GG).
In their charts you will see the patterns in each. All you have to do is wait for these technical events, and I’ve listed where I think the options could be trading when these events occur.
Royal Gold (RGLD)
RGLD has not broken out yet. It’s lagging slightly, but that is only because it’s in a very large symmetrical triangle.
Recommendation: Buy the RGLD Oct 45 Calls (MJQJI) for $1.30 or less.
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Goldcorp Inc. (GG)
GG, which is in a slightly smaller symmetrical triangle than RGLD, has now broken out.
We want to get positioned in the back test of this pattern.
Recommendation: Buy the GG Oct 40 Calls (GAGJH) for $2 for less.
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Randgold Resources Ltd. (GOLD)
GOLD is setting up for a possible back test to the continuation wedge it broke out of, which led us to the great gains we just booked.
Recommendation: Buy the GOLD Dec 70 Calls (GUDLN) for $3.50 or less.
The old ways of investing don’t work anymore. But trading options founded on scientific principle can and does work in volatile times like these.
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