After a big reversal last Wednesday, gold has been consolidating. Some would say it has been selling off. But in regardless how one characterize it, the reality is the price of gold has been pulling back from the 970 to the 920 level. From the charts, one can see a setup is developing for a trade in gold. For those that have no particular directional opinion on which way gold will move, then a possible trade would be a straddle or a strangle option on the gold ETF, GLD to capture the next up or down move. For the bears, when the price move below the supporting trendline, go short on GLD with a very tight stop on the other side of the supporting trendline. Finally, for the bulls, the reverse position of the bears can be taken by going long on GLD with a tight stop below the supporting trendline.
I believe gold is at a nice spot to start a trade with minimal risk if you respect your stop. Take a look at the charts. The reason gold is at a good spot to start a trade is you will find out whether you are on the right side or the wrong side of the trade very quickly. And if you are on the wrong side and got stopped out, reverse your position and still end up playing the next move. No matter how you trade it, respect your stops to stay in the game. Is the trade on gold over? To me, it just got started.
