Gold Selloffs or Dips-Strategies from Trader Perspectives
No market goes up in a straight line. A bull gives dips for new buyers to enter at lower risk levels; or for existing buyers to add to their positions. The bear gives rallies to sell. If there were no dips and rallies, no money would be made trading the markets. This holds for charts of all time intervals-monthly, weekly, daily, intraday. There are dips and rallies, sellers dominate, buyers dominate. That is the essential nature of financial markets.
Gold is selling off a bit right now. What's a trader to do? If the dip is nice enough, one can add to existing positions. Remember that people who are waiting on the sidelines are far more impatient to get into the raging bull than people who already bought Gold stocks a year or a couple of years ago and who are sitting on gains. Therefore, new positions people will be the first buyers on dip. The last buyers pn a dip are the ones who are confident about their positions and want to add more.
ASA, the proxy for Gold stocks (in the absence of a Gold ETF) is down about 14% from it's all time high, at about 64. The bullion, with GLD as the tracking stock, is trading a 68.14, down from it's high of 72.26 (GLD is 1/10 of the price per ounce of Gold in spot markets)
ASA is a good buy at the 60 level, which brings it down 20% from it's all time high of about 75. GLD is something more unpredictable, and I am not confident about the buy levels on that. This is all assuming that the original thesis-it is a bull, is valid. If the tables turn and a sell-off is predicting a bear market, all bets are off. Personally, my take is that it looks like a bull, but overextended; think about selling options on some of your Gold stocks if the bull stagnates and goes nowhere for the next couple of years.
Sanjay John G.
Gold is selling off a bit right now. What's a trader to do? If the dip is nice enough, one can add to existing positions. Remember that people who are waiting on the sidelines are far more impatient to get into the raging bull than people who already bought Gold stocks a year or a couple of years ago and who are sitting on gains. Therefore, new positions people will be the first buyers on dip. The last buyers pn a dip are the ones who are confident about their positions and want to add more.
ASA, the proxy for Gold stocks (in the absence of a Gold ETF) is down about 14% from it's all time high, at about 64. The bullion, with GLD as the tracking stock, is trading a 68.14, down from it's high of 72.26 (GLD is 1/10 of the price per ounce of Gold in spot markets)
ASA is a good buy at the 60 level, which brings it down 20% from it's all time high of about 75. GLD is something more unpredictable, and I am not confident about the buy levels on that. This is all assuming that the original thesis-it is a bull, is valid. If the tables turn and a sell-off is predicting a bear market, all bets are off. Personally, my take is that it looks like a bull, but overextended; think about selling options on some of your Gold stocks if the bull stagnates and goes nowhere for the next couple of years.
Sanjay John G.
1 Comments:
Nice site.
Keep up the good work!
Recently covered short position in KRY. What's your guess for the short term bottom in gold?
Advise.
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