The Truth About Where Gold Price Is Headed

I will be honest, it has been a long time since I have been excited about gold, but I am starting to like gold once again. I had grown too bored to care what gold did. With the bull market top in 2011, and four years later price continues to founder can you blame me?

Let me start out by painting a picture for you. This is my technical analysis overlaid on the price of gold. This simply gives you a visual of were the price of gold is trading.

But first, if you have not yet seen this “Gold in the USA” infographic you must check it out… it shows the history of gold in a visual format, and you will likely learn something from it – Click Here

GOLD HOLDS LONG-TERM BEARISH PATTERN

Gold peaked around 1900 in September 2011 and quickly fell to the 1550 area. The metal then consolidated for 18 months before it broke support. The sharp decline triggered a drop in price to $1200 in April 2013. Since then gold has been in another consolidation, which is a bearish continuation pattern.

The lower highs in 2013 and 2014 reflect weakening demand and increasing selling pressure at lower price levels. A break down in price below support would trigger further weakness and a drop to roughly $900 oz. If you want more of a bearish visual; see my August gold report – Click Here

gold technicals forecast

GOLD’S BULLISH OUTLOOK SIGNS OF A BOTTOM

SIGN #1: Gold is technically still in a down trend but it may be quietly forming a bottom. This is how bull markets often start. First it declines in value to a point which breaks the most steadfast bulls. And it does this by relentlessly losing value for an extended period of time. If the market doesn’t shake you out, it will wear you out!

Gold is no longer talked about by the majority of participants, nor is it talked about every day in the media. Simply put, everyone is bored of the low price and sideways trading the past couple of years.

SIGN #2: The key to front running the next rally in gold is to watch the price of gold stocks. They typically lead gold. So when gold stocks start outperforming the price of gold along with the HUI gold stock index we can expect the price of gold to follow a few days or weeks later.

Gold stocks as a whole have not yet started to outperform gold. But if we look at the HUI/Gold ratio it is at extreme levels. This is the same level we saw in 2001 before gold and gold stocks rocketed higher for several years. The ratio is not something you should trade off of, but it’s a good confirmation indicator that gold stocks are priced fairly.

SIGN #3: Looking at what the price of gold has done over the past 40 years 12 months before interest rates have been increased is very interesting and not something many traders know.

With interest rates expected to rise in 2015 this is a statistic that should be reviewed. Numbers do not lie and historical charts show the price of gold rising an average of 20% within the year before interest rates rise. And in case you happen to miss the first 6 months of the move, do not worry. Most of the rally takes place just 6 months before rates go up.

SIGN #4: September is the strongest month for gold each year when looking at the 32 year seasonal chart. The odds favor higher prices this month. Likely not enough to spark a new bull market, but may build a base in the price.

gold seasonal

GOLD FORECAST AND CONCLUSION:

One day these weeks gold will breakout down from this consolidation pattern or breakout and rally from this basing pattern. Which way is the question we are all wondering.

Anyone who clearly states gold has bottomed and to buy is taking a stab at being a hero and to say what the masses want to hear. Sure, it sounds great, but it’s BS.

From a price and technical standpoint gold remains bearish or neutral at best. Until price clearly breaks out from this range you should trade with caution and small position sizes.

However, when/if gold starts to rally it is likely best to jump on the train rather than wait for a pause or pullback in price after the breakout. It may just keep on rising until $1550 is reached.

Watch My Daily Gold Video Analysis at www.TheGoldAndOilGuy.com

Automated Investing System for the Average Trader: www.AlgoTrades.net

Chris Vermeulen

A Technical Traders Successful Option Trade

Facebook is a hot momentum stock that has found its way on trading lists for many traders, myself included. Facebook stock and options have strong liquidity, decent volatility to trade typically, and the stock price is generally momentum driven.  Generally speaking, if technology stocks are working Facebook (FB) is moving higher, however the same can be said regarding technology sector weakness.

Earlier in the year, Facebook was consolidating in a price range between around $54.50 per share to around $63.50 per share. From late May into the early part of June, FB pushed to the upside toward $68 per share as can be seen below:

Chart1 (1)

The move to the upside in Facebook stalled at the end of June and price dropped rapidly at the beginning of July. FB opened on July 1st at $67.58 per share. By July 8th, Facebook closed trading at $62.76 per share, a drop of more than 7% in a very short period of time.

As a contrarian trader, I immediately became interested in taking a long trade to capture a quick pop higher in Facebook. On July 9th, I entered a FB Call Diagonal Spread which would benefit from the passage of time as well as higher prices in Facebook.

The trade was constructed in the following manner:
Buy to Open 1 FB August Monthly 62.50 Call
Sell to Open 1 FB July Monthly 70 Call

The total trade was executed at a cost of 4.93 per spread or a maximum risk of $493 per spread. On July 15th, the trade was closed for a credit of 6.04, or a profit of $604 per spread. The trade resulted in a gross gain of $111 per spread, or 22.51% based on maximum risk undertaken per spread. The Facebook stock chart during this period of time indicating higher prices is shown below.

Chart2 (1)

This trade was taken in our new options service and members were able to capitalize on a very profitable trade in a fairly short period of time. This trade was taken with about half the normal risk that the service opens new trades with as it is an opening debit trade which typically constitutes smaller position sizing based on the service’s strategy.

Overall, the new service is off to a great start in terms of performance and the service is sending out nearly one new trade per day for members. Primarily we focus on credit spreads and more advanced option trades, but from time-to-time we do sprinkle in some basic long options for directional trades in the S&P 500 Index (SPX) and the Volatility Index (VIX). The FB trade is just another great example of how advanced option strategies can produce very strong returns in a fairly short period of time!

Join Us Today at: http://www.thetechnicaltraders.com/options/

Chris Vermeulen

Black Gold: Oil Option Trade Setup – Will Oil Bounce? Who Cares!

Oil futures were on the tip of every political and financial pundits’ tongues less than a month ago as geopolitical tensions in Iraq heated up. Fast forward to today, and tensions in the Middle East have intensified further. However, since June 25th oil prices have been falling fast.

Oil futures prices have fallen from around $107.50 per barrel down to around $101.50 / barrel as I am writing. As the chart below indicates, oil futures should see some support around the $101 per barrel price level and stronger support yet down around $98 per barrel.

Chart1 (1)

Is this a pullback that is setting up for a larger move to the upside, or is oil prices going to move down toward $95 / barrel again? Purely from a statistical standpoint, including June 25th through today oil prices have traded 12 sessions. During those 12 trading sessions, oil prices only managed to close in positive territory 4 times with some very strong selling pressure along the way. In raw percentage terms, oil futures have lost nearly 5.5% since June 25th peak to trough.

Purely from a statistical standpoint, the probabilities are favorable that at the very least a bounce could play out in the near future that lasts several trading sessions. Furthermore, that bounce could turn into a stronger move to the upside in the weeks ahead. Obviously at this point it is purely speculation, but the intermediate to longer term trend on the daily time frame is clearly to the upside.

Instead of just rushing in and buying a long oil position using futures or purchasing an oil ETF like USO, I wanted to construct an option trade that would capitalize from higher oil prices in the near term, but with some hedging in case more downside occurs.

In order to accomplish this, I am going to use a standard Iron Condor trade construction. This construction capitalizes on time decay and volatility decay. Additionally this structure will allow traders to profit from a consolidating price pattern as the profitability is measured in a range.

However, when designing this trade structure I want to skew the position to the upside by selling the put side of the Iron Condor Spread closer to the current USO price. The call credit portion of the spread will be sold further from price. By structuring the trade in this way, I will maximize the profit potential of this trade and provide some hedging by reducing the total maximum risk per spread by adding the call credit portion of the trade.

Consider the price chart of USO which is shown below. I have highlighted the price range that would be profitable to the August monthly option expiration which would occur at the close on August 15th.

Chart2 (1)

As long as price stays in the range shown above, the USO August Iron Condor Spread would be profitable.  This strategy does involve some patience, but if USO prices shot up in a short period of time the trade could be closed for some nice potential profit.

The trade structure I have chosen would have a profit potential of $35 per spread, or a total potential return based on maximum potential risk of 30.43% per spread. The probability based on today’s implied volatility in USO options for the entire spread to be profitable at expiration (August 15th) is roughly 72%.

Our new option service specializes in identifying these types of trading setups and helps investors capitalize on consolidating chart patterns, volatility collapse, and profiting from the passage of time.

And if advanced options trades are not for you, we also provide simple option trading setups where we buy either a call or put option based on the SP500 and VIX. The nice thing about buying calls and puts is that you can trade with an account as little as $2,500 with big potential upside.

Join Us Today at: http://www.thetechnicaltraders.com/options/

Chris Vermeulen

Gold Option Trade – Will Gold Continue to Consolidate?

Until recently, the world has forgotten about gold and gold futures prices it would seem. A few years ago, all we heard about was gold and silver futures making new highs on the back of the Federal Reserve’s constant money printing schemes. However, after a dramatic selloff the world of precious metals it became very quiet.

Gold prices have been in a giant basing or consolidation pattern for more than one year. As can clearly be seen below, gold futures prices have traded in a range between roughly 1,175 and 1,430 since June of 2013.

Chart1

The past few weeks we have heard more about gold prices as we have seen a five week rally since late May. I would also draw your attention to the fact that gold futures also made a slightly higher low which is typically a bullish signal.

At this point in time, it appears quite likely that a possible test of the upper end of the channel is possible in the next few weeks / months. If price can push above 1,430 on the spot gold futures price a breakout could transpire that could see $150 or more added to the spot gold price.

Clearly there are a variety of ways that a trader could consider higher prices in gold futures. However, a basic option strategy can pay handsome rewards that will profit from a continued consolidation. The trade strategy is profitable as long as price stays within a range for a specified period of time. Ultimately this type of trade strategy involves the use of options and capitalizes on the passage of time.

The strategy is called an Iron Condor Strategy, however in order to make this trade worth while we would consider widening out the strikes to increase our profitability while simultaneously increasing our overall risk per spread. Consider the chart of GLD below which has highlighted the price range that would be profitable to the August monthly option expiration on August 15th.

Chart2

As long as price stays in the range shown above, the GLD August Iron Condor Spread would be profitable. Clearly this strategy involves patience and the expectation that gold prices will continue to consolidate. This trade has the profit potential of $37 per spread, or a total potential return based on maximum possible risk of 13.62%. The probability based on today’s implied volatility in GLD options for this spread to be profitable at expiration (August 15) is roughly 80%.

Our new option service specializes in identifying these types of consolidation setups and helps investors capitalize on consolidating chart patterns, volatility collapse, and profiting from the passage of time. And if you Advanced options trades are not your thing, we also provide Simple options where  we buy either a call or put option based on the SP500 and VIX. The nice thing about buying calls and puts is that you can trade with an account as little as $2,500.

If You Want Daily Options Trades, Join Technical Traders Options Alerts: www.TheTechnicalTraders.com/options

Chris Vermeulen

AlgoTrades Systems and EquaMetrics Announce Strategic Equity Partnership

As you likely know I provide my investing strategy for large sums of money to be traded automatically in your brokerage account. I do this through AlgoTrades which is my automated investing system.

Anyway, AlgoTrades which is a leading provider of automatic investing systems for individual investors, and EquaMetrics Inc., the leading provider of algorithmic trading systems and their Intuitive, drag-and-drop interface that lets you quickly build and edit complex algorithms – in a matter of minutes, is proud to announce a strategic partnership that will arm both active traders and investors with the ability to have the AlgoTrades investing system traded for them, and build trading systems of their own. AlgoTrades systems will partner with EquaMetrics to provide its automated futures trading system on the RIZM EquaMetrics ecosystem platform.

AlgoTrades has taken a clear direction by investing in EquaMetrics private equity placement. More investors are needed before RIZM closes their investment funding to the general public which you can get their investors package and become a part of this exciting journey: Click Here

IMPORTANT FOR INVESTORS:
See what else I had to say on MarketWatch.com: Click Here

Sincerely,
Chris Vermeulen
TheGoldAndOilGuy.com
Founder of AlgoTrades Systems
www.AlgoTrades.net

My Automated Investing System Presentation at TradersWorldExpo

tradersworlsbookHey folks, it’s Chris Vermeulen here. I just wanted to mention that doing the traders world online Expo this week. You can download the traders world Expo book from Amazon free of charge until June 27.

This book is jam packed full of highly educational articles from the sponsored guests including myself. For this Expo I decided cover the topic of automated investing systems and why you need them as part of your investment portfolio. I put together a short educational article in the book and you can also watch my presentation on the TradersWorldExpo.com website along with dozens of other big-name guests presenting at the Expo.

Get TradersWorldExpo Book Free Until June 27th: Click Here

Watch My Automated Investing System Presentation: Click Here

Browse Dozens of Trading Presentation & Watch Free: Click Here

This is an important book discussing the use of different strategies methods about trading. It was written by over 30 expert traders.

The book was designed to help you develop your own trading edge in the markets to put you above others who don’t have an edge and just trade by the seat of their pants. 90% of traders actually lose in the markets and the main reason is simply that they don’t have an edge.

All of the writers in this book are very experienced and knowledgeable of different ways. Each of them has their own expertise in trading the markets. What sets these traders apart from other traders? Many think that beating the markets has something to do with discovering and using some secret formula. The traders in this book have the right attitude and many employ a combination of fundamental analysis, technical analysis principles and formulas in their best trading strategies. This gives them a trading edge over other traders.

If you want to be successful at trading, you too must have your edge.

One needs to find successful trading strategies and implement them in their own trading method. The purpose of this book is to present to you the best trading strategies of these traders so that you might be able to select those that fit you best and then implement them into your own trading style.

I wish to express my appreciation to all the writers in this book who made the book possible. They have spent many hours of their time and hard work in writing their section of the book and the putting together their video presentation for the online expo.

Get TradersWorldExpo Book Free Until June 27th: Click Here

Watch My Automated Investing System Presentation: Click Here

Browse Dozens of Trading Presentation & Watch Free: Click Here

Next Trade Ideas & Forecast Video

Here are a couple of my market forecasts for bonds, dollar, euro, gold, silver, mining stocks and the broad stock market.

VIDEO FORECAST

Are You Ready for Negative Interest Rate and Pay the Bank to Hold Your Money?

The six members of the European Central Bank (ECB) Executive Board and the 16 governors of the euro area central banks vote on where to set the rate. We watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.

A higher than expected rate is positive for the EUR, while a lower than expected rate is negative for the EUR. Today (Thursday June 5th) we expected a rate cut. The cut was not as much as analysts expected which is bullish for the short term, but the rate is still declining and nearing zero, or even worse, negative territory.

ecbrates

eurochart

A negative interest rate may sound crazy or impossible, but it’s already happening in Denmark.

Europe is already in a deflationary state and central banks are doing everything they can to bring about inflation by cutting rates and devaluing the euro.

This will cause a ripple through multiple asset classes and will drastically alter the outcome of individuals worldwide.

Just imagine if you had to pay a bank to hold your money and you do not earn any interest but rather pay interest.

People who have been saving their entire lives will get hit the hardest. Retired folks will stop earning money and start paying for all the money they hold held at banks.

Individuals will go more into debt because money will be extremely cheap to borrow.

Price of assets like equities, real-estate, discretionary goods will rise because the cheap money everyone is borrowing will be used to buy more stuff. While all this happens everyone takes on more dept. It is a brutal spiral leading to increase debt levels, inflation and eventually bankruptcy.

If the euro dollar starts to decline at a quicker pace the US dollar will likely rally. A strong dollar could affect the commodities market including gold, silver and the European stock markets.

Today’s rate cut led to a pop in the euro, but that is likely to be short lived. I hope this sheds some light on the markets and helps in your trading.

Chris Vermeulen

P.S. In the next few days member’s and myself will be looking to enter some trades based round this analysis. See Premium Trading Video & Newsletter