Gold futures moved up a fifth straight session to end at a near three-week high on Tuesday, with traders opting for the safe haven appeal of the precious metal as equities in the U.S. ticked lower amid continued worries over Greece’s financial woes. Since the Fed announcement, the Dollar has been under duress while Gold has rallied mostly due to heavy short-covering in the market.
Looking at the chart above, the first major leg down from the highs made in January fell 119.00. However, support just above the 1140 level held and was formidable. The market the last few sessions was able to close above the downward trend line for consecutive sessions and now points to a target of 1224.0 basis June Futures. Stochastics are showing divergence indicating a potential loss of bearish momentum. It is my opinion that 1224 could be tested, if nothing else enters into the market.
The Trade
- I propose buying the June Gold futures at support near 1190 with an objective of 1224.0 to the upside.
- Use a protective stop loss at 1173.0 on a good-to-cancel basis to protect the position.
- A full size Gold contract would be risking approximately $1700 plus all commissions and fees with a profit objective of $3400.00, if filled first on the buy side at 1190.0 and the sell side exit at 1224.0.
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RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
