Gold is currently $225 off it lows established in late June, mounting a very impressive rally in the last two months. The gold bugs are back in the media as a bull market may be re-emerging. My stance is prices appreciated too fast and too much. Does this mean I am a bear…NO…it just means that I think we get a correction before additional upside is seen. As of this post December futures are $29 off their recent highs. Coincidence or not futures ran into the same resistance levels in early June before a drop of $200 leading to a sub $1200 trade. While I am not calling for that and clearly past performance is not indicative of future results a correction lower is my call.
My suggestion is allow the Fibonacci levels on the chart below to help guide you on bearish trades. The 100 day MA (red line) is my first objective while I think we could see a 50% Fibonacci retracement that would lead to a probe of the 50 day MA (light blue line). There is a seasonal tendency in September to see December gold futures to appreciate so because that is not working in your favor trail stops and take profits if given a window for profits to be realized on bearish trades as we will likely want to reverse from lower levels in the coming weeks. Pay attention to outside market influence as energies and metals appear to be heavily correlated and the dollar currently is exhibiting an inverse relationship.
Gold Trade ideas:
- Short December mini gold futures (33.33 troy ounces).
- Short December standard futures (100 troy ounces) and sell an out of the money put 1:1. I’m looking at the $1375 and $1350 strikes. In most instances I’m looking to sell options with a 30-40% delta. I want to monitor the open interest in the particular strike and I’m looking to collect in premium what I view to be the risk. In this instance $35-45 or $3,500-4,500.
- Bear put spread. The $1400/1325 could be purchased for $2600. This $75 spread represents a $7,500 spread and has a positive delta of 18%. If held until expiration and under $1325 the spread would be maximized but a more likely scenario if I am correct with my analyses is futures drop $100 in the coming weeks and this spread should be worth $3,500-4,000.
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As always, I’m here to discuss specifics and give guidance. Shoot me an email…Give me a call… you can reach me at: firstname.lastname@example.org or 954-929-9997
That’s a great post. The targets and margins to trade is crystal clear to sustain on a safer side.