Pattern Alert: GLD and a Possible Short-term Bounce?

Last Friday, Gold fell to its lowest level since to under $1,200, which is what it costs many miners to produce an ounce of gold.  Today’s Pattern Alert looks at the SPDR Gold ETF – ticker symbol GLD.

Friday’s low of 114.68 on GLD followed two significant gap downs in the share price.  The most recent occurred from the June 25th close of 123.47 and the next morning’s open of 119.88 – a 3 percent drop overnight.

The next gap was created when GLD closed at 130.59 on June 19th and then opened the next day at 125.22 – a 4 percent overnight drop.

For traders, these gaps may provide short-term resistance and form the basis of today’s Pattern Alert.  As GLD rises to the starting price of both gaps, we’re looking for resistance.

If you own shares of GLD now, consider writing covered calls at or slightly above these resistance levels.  If GLD stalls, you will still collect the call income.  If you see GLD falling again, be sure to protect yourself against further loss – always a good idea.

Short-term traders who don’t own GLD can use Weekly options.  If you want to trade the bounce, consider buying Weekly calls or selling Weekly puts.

Before you start to trade options, be sure to visit us to learn about options.

  • John Ritter

    Lol did exactly that bought the July 117’s on Friday at $2.60 and wrote the $120’s at $3.60 giving me an additional $1 profit vs. if I simply cashed out this morning. I only lose if it falls all the way back to $117 and even then I still have that $1 profit. Anything from here down to $120 in the next 2wks is just gravy. If it pulls an April like pop of $13 then I woulda/shoulda/coulda held hundreds of percent return.