Stock Picks – Pullback Could Offer Second Chance to Buy SPDR Gold Trust-GLD

by Jim Woods | October 12, 2009 11:25 am

 

Editor’s note: OptionsZone editor Jim Woods will be filling in for Sam Collins today. 

SPDR Gold Trust (GLD[1]) – This exchange-traded fund (ETF) seeks to mirror the price of gold bullion.  

 

Following a rise from less than $40 to more than $110, GLD spent most of 2008 in a downtrend, which reached $66 in early October. Since then, it has tracked the price of bullion and rose to just below $100 in February.

Along the way, it flashed one of the most respected bullish signals, the gold cross, which usually precedes a major advance.

On April 9[2], at $86.33, I said, “Following its run to $100, GLD pulled back to support at the 200-day moving average where it is about to issue a positive signal from the stochastic. Shares purchased now could reward the buyer with a move to $125.”

On Oct. 25, GLD leapt through resistance[3] on a breakaway gap with huge volume. This breakout from a major resistance zone tells us that GLD has the potential to make a big advance with an ultimate trading target of $130. 

But last week’s series of reversals and the sell signal from the Moving Average Convergence/Divergence (MACD)[4] could give those who haven’t taken a position in GLD an opportunity to buy it under $100. A pullback like that is characteristic of a big breakout and often provides a second chance to buy. 

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