Sector Outlook: Gold

The Spider Gold Shares (GLD) came into Wednesday’s session struggling to hold its 100-day moving average after closing a nickel below this level on Tuesday. The 50-day and 200-day moving averages are in downtrends with the possibility of a death-cross forming over the next 4-6 weeks. This pattern could be negated on a move above $120 and would be a bullish development.

The chart below shows current resistance at $119-$119.50 with yesterday’s high at $119.06. Support is at $118-$117.75 with a move below the latter a bearish development that could possibly lead to $116 and mid-May support.

The 3-year weekly chart shows shares are trapped between the 50-day and 200-day moving averages with a possible death-cross more in focus. Again, a move above $120 would help but a possible longer-term recovery isn’t likely to happen until $122.50 is cleared, afterwards. A break below $117.50 would favor the bears for a possible drop to $116.25-$116.

Bearish traders can targets near-term and longer-term put options if $117.75-$117.50 failed this week, or next. The GLD July 117 puts (GLD170721P00117000, $0.40, down $0.10) look tempting and would double if GLD trades below $116.20, technically, by July 21st.

The GLD August 117 puts (GLD170818P00117000, $0.95, down $0.10) would double if GLD trades below $116.10, technically, by August 18th. These options would also provide an extra month of time for a trade to play out.

If $120 clears, we will update the outlook on GLD with possible call options. If we decide to make GLD an official recommendation, we will issue a New Trade Alert.