As markets get wilder and volatility rises, people are scrambling to protect there investment capital. Not only are we seeing markets begin a potential freefall, interest rates are steadily climbing making money more expensive to access.
A great place to look to see where money is going when markets get scary is gold. It has traditionally been a safe haven. When we look at the chart of GLD, a gold based ETF, we can see it starting to show signs of a climb.
The first thing we see is that it has crossed its 10 day moving average and is looking for support. Since it has done that a couple times in this recent downtrend we have to look to see why this might be different. When we look at the green circle at the bottom of the chart we see that this time the MACD is positioned to cross. That is a solid indicator that it may reverse.
As we look at potential ways to trade this, simply buying the ETF is one choice. But if we are looking for the optimal leverage, options are a strong consideration. If we see the solid cross occur on the MACD we can expect a refill back to the 160 level (the blue line) where we saw previous resistance or we could see it run all the way back to the recent high at about 167.
When we look at November 18 call options for GLD the 165 strike is at just over $1 currently. Instead of risking $155 per share, we can position ourselves to grab a win with just $1. Plus, if we see a 10 point move in the ETF, that could create an exponentially greater move in the call option.
If you are interested in other ways to spot trades that could exploit this current market, check out Wendy Kirkland’s Golden Paycheck approach. You can get the details here.
Keep learning and trade wisely,
John Boyer
Editor
Market Wealth Daily
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