By Chris Vermeulen
While Gold was extremely popular the past few years, I think it’s safe to say Crude Oil is unbeatable for popularity, as it’s a resource which almost everyone uses on a daily basis and it affects all of us in the wallet when oil prices rise as fuel, shipping costs and petroleum products start to cost more and more. This is the first time I have REALLY noticed everyone is following the price of oil. When kids start talking about it, then you know its being watched like a hawk from all types of individuals and traders.
When crude oil peaked at $147.90 back in July, people were starting to panic. The increase on fuel alone was really taking a toll on commuters and shipping costs went through the roof, which hurt almost every business in some way. That being said, oil is now back down at support and looking ready for a bounce.

Currently the monthly chart of crude oil has pulled back to the 200 day moving average, which is generally a good place where buyers step in. Also to take that same price level and see that it’s also a long-term support level, really starts making things look better for a possible bounce.

Oil has sold off so hard and it’s become the talk of the world, everyone wants to catch the bounce in oil price when it does finally bounce. I can see oil bouncing back up to the $60 level but only time will tell. I don’t forecast or trade with a bias; I am strictly a technical trader. Only 12 months ago it was trading an average of 30 million shares and now it’s blasted higher to over 200 million shares each week, indicating we should see some type of reversal soon. This prolonged steep sell-off is starting to show signs of a bottom.

Oil continues to be in a strong down trend and waiting for a low risk entry point is crucial. Picking bottoms or chasing rallies just doesn’t perform well over the long run. Following a basket of ETF’s like USO, DXO, DTO, XLE, GLD, DGP, GDX, XGD.TO and more, allows me to catch moves within the Gold and oil sector.

My strategy is conservative and I do miss a number of good trades, because I need risk to be under 3% before I jump. Generally within the basket of ETF’s I follow, I will get one or two signals when the market reverses or bounces off support. And that is the fund where I put my money. I prefer to trade GLD and USO, but if GDX gives a signal I trade it when the time is right. Quality trades are what I focus on finding/waiting for and I avoid a ton of high risk losing trades, which are the silent killers. One high-risk trade losing 7%+ will cripple your profits for the year quickly. I continue to wait for an entry point, which could be just around the corner if things work out.

Gold has performed well after finding support and bouncing to the top of its descending trend line. The daily gold chart is full of noise and with everyone excited for the next big rally in gold, I am sure Fridays big up day really has you stressed out, in case this is the next gold bull, because you don’t want to get left behind. During emotional times like this, I like to step back and take a look at gold from a distance.

Currently gold is in a downward trend and just finished hitting its head off resistance 3 weeks ago. While I am bullish on gold, I do not trade long when the overall trend is down and I must have a proper setup and low risk entry point. Gold is under weekly selling pressure and is trading just below resistance.

Seems like everyone is excited and waiting for gold to start its next big rally, but from a short-term traders point of view like mine, Gold just does not look like a buy yet. Currently gold is in a downward trend on the weekly chart and near resistance. Also, the risk is more than double what I want, for me to enter a trade. I continue to wait for the dust to settle before our hard earned money is put back to work.

By Arrangement with www.TheGoldAndOilGuy.com

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