Ride The Gold Rally With The Best ETFs And Stocks Of 2016

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The summer malaise settling on stocks has done little to help gold prices. In fact, the yellow metal just plunged to its deepest oversold levels since December 2016. What is ailing the

SPDR Gold Shares Fund (NYSEARCA:>GLD

)? And more importantly, how can we capitalize on its pain?

Such questions will be asked and answered in today’s article.

Those seeking a culprit for GLD’s weaksauce behavior need look no further than the U.S. dollar. The mighty greenback’s muscle-flexing this summer upended gold’s price recovery.

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The inverse relationship between gold and the dollar has stayed true this year. As shown below, the 20-day correlation between the pair sits at -0.67. And the reading has hovered near -0.75 the majority of the year.

View photos

With such a strong negative relationship, it’s a good bet GLD will continue to suffer if the dollar remains firm.

The daily trend for GLD is now heading south. The 20-day and 50-day are both careening lower, but its the recent rollover by the 200-day moving average that should be giving buyers pause. A declining 200-day moving average is the ultimate manifestation of sellers wresting control of the longer-term daily trend. With prices now submerged, all rallies are suspect.

Over the past two trading sessions, GLD has finally come up for air, but I think the strength is a ruse. Given the deeply oversold readings, we were due for a snap-back. But once the short covering is over, I suspect lower prices are coming. And that makes me want to deploy bearish trades into the rally.

View photos

Source: OptionsAnalytix

GLD Bear Calls

To bank on continued weakness, sell the Aug $122/$125 bear call spread for 40 cents or better. Consider it a bet that the gold ETF sits below $122 at expiration. If it does you will capture the max reward of 40 cents. The initial cost and risk is $2.60 and will be forfeited if the stock rises above $125. To minimize the loss if gold catches a bid, I suggest exiting on a break above $124.

As of this writing, Tyler Craig didn’t hold positions on any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, >Tales of a Technician.

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The post Bank on Gold Bears with the SPDR Gold Shares Fund appeared first on InvestorPlace.

Source : https://finance.yahoo.com/news/bank-gold-bears-spdr-gold-180305352.html

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