GLD ETF Trader – Daily Trend Chart
The gold trading chart below shows two different types of trends. The initial timeframe of the chart illustrates what I call a Normal Trend. This is a series of higher highs and lows.
This type of trend allows an investment to continue profitably for a very long period of time. For example a daily chart like the one below can continue to trend like this for 6-8 months. The reason for this is because price appreciation is increasing at a rate which investors are comfortable with. Also, the pullbacks cleanse the investment vehicle of weak traders every few weeks allowing fresh money to enter at higher price.
Now if you look at the later timeframe of this rally we observe a rally phase I call an Extended Rally. An extended rally is when price appreciates without any pullbacks.
You can make a fortune with this trend very quickly, but you must realize that reversals are fast and sharp. And that, we observe, is how GLD performed in December. While some call December’s price drop a pullback, I call it a technical breakdown. The sharp price reversal and heavy volume associated with this type of move generally provides excellent short term momentum trades. A lot of damage is done to the investment on a heavy volume breakdown taking weeks for a recovering to occur.
Normal trend rally, extended rally, predictably fast and sharp technical breakdown followed by weeks of recovery.
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Chris Vermeulen
Categorised as: Gold News
When looking at gold you can choose a chart timeline of any length and make a case for up or down. I believe that you assessment is flawed based on the timeline you selected. IMHO