Editor’s note: Serge Berger, the head trader and investment strategist for , will be providing the Trade of the Day until Sam Collins returns on June 27.
SPDR Gold Shares (NYSE: ) — There are numerous reasons investors buy and hold gold. They are often looking for diversification or a hedge against geopolitical unrest, the sliding U.S. dollar, inflation or deflation. And the trade I am looking at today is on the popular gold exchange-traded fund (ETF) GLD.
As we all know, gold has been in a huge uptrend. GLD traded around $40 in 2004. Earlier this year, it peaked at $153.61. That’s an almost 285% move in less than seven years.
Since late 2008, GLD has traded in a fairly steep upward channel, the top end of which was tested in early May.
From early November 2010 to early April 2011, GLD consolidated and carved out a picture-perfect inverse head-and-shoulders pattern that gave way to a quick and sharp rise in April. In late April, the price of GLD almost exactly hit the price target of the inverse head-and-shoulders pattern.
Since the silver crash in May, GLD has been somewhat out of the news, but has slowly worked itself higher. On June 6, it found resistance at $151.50. A few days later, it found support near the rising 50-day simple moving average (yellow line). Yesterday, GLD traded above $151.50 intraday, but closed at just about $151. I see decent potential that GLD will break out higher soon.
The trade: Open GLD long between $151 and $151.50. I think this trade has to be given some breathing room and, as such, I would place a trailing stop at the 50-day simple moving average (yellow line) with a first target at $155 and second target at $160.
