GLD Nears Long-Term Support
2022.10.12 08:08
As much as is a hedge against , it’s still not immune to the broader influences of the market as a whole (as most of the markets have been down-trending for far longer). If you hold physical gold or precious metals in something like a gold IRA, you don’t need to concern yourself with the current prices, as you are in this long-term as a store of value.
However, if you are a trader, it’s essential to objectively analyze what we see in the Gold market as we try to gain an advantage in our trading. Over the past seven months, we see a clear downtrend that began with the peak on Mar. 8, 2022.
Looking at the price action from that day, we might wonder if there was any indication that prices would reverse from there. Well, as in most trading, all we have to do is zoom out to get a clearer picture of what was going on and the influences that led to a steep selloff.
Take a look at the weekly chart as we zoom back a few years. The point that GLD (NYSE:) rejected from was the price level that we expected it to have trouble getting through: the peak price from August 2020.
Most of the time, we traders can get too focused on what is happening now instead of zooming out to take in the bigger picture. If we’re trading the 5-minute chart, we avoid zooming out to look at the 1-hour or the daily chart. If we’re trading the 1-hour chart, we hyper-focus on the 1-hour chart but neglect to zoom out and see what’s going on with the daily or weekly chart.
So as we zoom out here on the weekly chart, we see that the $146.82 area is the next major support level as we look back to see it was the swing high back in September of 2019. We can expect the price to have trouble breaking through that level.
As we zoom out even further, that support area is confirmed as we look all the way back to 2011 and 2012, where the price found support multiple times in the $147 to $148 range. So, adding that price level to our chart, we come away with a nice area of support to keep our eyes on from about $146.50 to $148.00 or so.
Always remember that support and resistance are areas and not exact price points most of the time. So as GLD continues to trend down, we need to wait and see how it reacts to that area before taking a trade. Some things to keep an eye on when the price is close to this support area:
- Is there a ton of buying volume at that level?
- Are there large bottom wicks that form off of those areas?
- Does the price break through that area with an increasing selling volume?
- Does the price get stuck there and begin to consolidate?
If we can patiently await the answers to these questions, it will set us up in a much better position to take a profitable trade rather than trying to assume what will happen preemptively. Wait patiently for the price to come to a level, watch how it reacts, and then take a trade based on what you see. That’s the only way to remain profitable in the long run.
