Friday in a bearish market in the summer is not a good time to try to buy stocks.
This is a good time to be building your list of candidates for when the time is right.
However, there are still opportunities to profit in these conditions.
In fact, today’s trade idea is one that is ideally suited for this kind of day in a bear market.
A few weeks ago, I brought the Gold ETF (GLD) to your attention when it broke its 50-day average. The trade idea was to buy it if it confirmed the break over the average by trading over $123.
It never traded over $123. I was early.
However, it did do something else significant that makes it even more interesting now.
GLD’s early May rally was the first rally that took out a prior swing high (on 4/26 around 121) since its correction from its February highs.
More importantly, its subsequent decline did not make a new low for the move.
So now that it’s about to break the 121 level, and the 50-day average again the chart is even more bullish!
In addition to its bullish chart, the geo-political turmoil and a declining stock market provide the fundamental reason for investors to get bullish on GLD.
As a result, there is potential for both a quick pop starting Friday, and a longer-term move if the trade wars continue to escalate.
I would like to see it trade above $122 before entering a trade, and I wouldn’t pay more than $122.50 right now.
If the market is weak on Friday, and it gaps over $122, then the buy zone is $121.50 to $122.50. Don’t buy under $121.50 as that would indicate that the bulls are not in control yet.
The best stop right now is under $120.40.
If you’re an options trader, you may want to consider the August 127 calls.
If this trade plays out as quick pop to start during a quick drop in stocks, then GLD could easily jump to $125 quickly. In that case, your August 127 calls are likely to double.
Regardless of how this plays out in the short run, the swing pattern I described here suggests this should be on your watch list as an alternative to stocks until it trades below $119.
Rick Nartarian, Chief Investment Officer
The American Investor Daily