Past GLD Reversals

Today I’m going to show you what the past two key reversals in GLD looked like and how this one is very similar in nature. We had a nice little bump to the upside in gold and gold equities today as we regained some of the losses but the chart below explains how this looks just like a setup.

On June 28th we had a key reversal on the GLD. The following 2 days were to the upside and they day after the reversal itself was even a bullish hammer candle. The reasons why you shouldn’t have bought into it was the key reversal was the stronger signal, and you had not crossed overbought on the slow stochastic. If you didn’t buy into it, you saved yourself a 7 point headache over the next month and waited for the bullish divergence at the end of the month which started the current rally.

The most recent key reversal other than yesterday took place on October 7th which set up the bullish flag that we could have used as a nice little discount before the FOMC statement. You also had a short-lived rally right after this reversal. The reason you can tell it was a fake is because your slow stochastic remained well overbought and had formed a bearish divergence pattern. Once again, if you held back on buying there you could have waited until the 21st of that month and bought precisely when the stochastic tapped overbought. Shortly thereafter the %K crossed over the %D and the rest is history.

This key reversal is no different, volatile and on large volume. Today we had an up-day complete with the bull hammer candlestick, much like the one after the June 28th move. I suspect that this is the setup that we should have come to expect by now. The green volume stick for the day is misleading, if you check the intraday chart, most of the volume is selling volume, only the candle is colored green due to the closing price. The %K has also crossed under the %D and is still lingering in overbought territory. I don’t see this setup lasting very long and I expect another pullback is right around the bend. So if you’re holding cash, hold it just a little longer and let your chart help you find your entry point.

About Aaron Basile
Day Trading and Swing Trading Ideas, Certified Personal Trainer, Power Bodybuilding, Avid Sports Fan (NBA, NFL)

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