January 24, 2022


Technical Analysis of Financial Markets

“Fools Gold”

“Fools Gold”

U.S. investment banking giant Goldman Sachs has been vocal in their bullishness of commodities for 2019, specifically that of gold. In the early going they have been correct, but I think a near term short opportunity is presenting itself here.

Here are a couple of things I am watching:

An intraday chart of GLD so far this year shows that gold has gapped up into the 2nd standard deviation territory. In short, price is a stretched rubber band which can snap back toward more agreed upon levels of value at any time.

OmahaCharts Goldman Sachs Stock Analysis “Fools Gold”

As an industry group, gold stocks are stretched also. Take a look at the OB signal displayed in Exodus Market Intelligence for the gold stocks:

OmahaCharts Goldman Sachs Stock Analysis Two - “Fools Gold”

You can see that when the oscillator gets stretched out to these levels, it tends to mean revert fairly swiftly.

Looking at a weekly chart with simple Bollinger bands added, we can see how gold reacts when price closes outside of the top Bollinger band or pushes up through it:

OmahaCharts Goldman Sachs Stock Analysis Three - “Fools Gold”

If history is any tell, GLD is ripe for a reversal in the near future. I won’t call the top, and I won’t call the bottom but for a trade I think this is setting up.

I am in GLD February puts in an effort to capture profits as GLD mean reverts, getting back to a more delta neutral position.

OmahaCharts Goldman Sachs Stock Analysis Four - “Fools Gold”