Today the talking heads are falling all over themselves talking about Gold. Apparently, Goldman Sachs some time ago put 1600 on the map as a bull target. Today we posted a high close to 1575. In May, we posted a high at 1577.5. Today we ticked off at 1574.30. That’s close enough for me to want to sell it here.
Or buy some 1480 or even some 1450 puts.
Buying puts eliminates the possibility of margin calls after the trade is in place. Its a buy and forget strategy which fits well if you don’t have the time or the stomach to sit and watch every minute rally and bounce.
Now, one caveat, The trend is obviously up for gold. just last February we were at 1310. On a long term chart, there is a major support trend line extending all the way back to the August 2008 low at 681. The trend line touches again in November of 2008 at 698; then a third time at 1158 which was the July 2010 low.
So, what is the significance of this? Support on this trend line is down at 1408 for today. Why couldn’t gold break down from 1575, all the way down to 1408? Give all the Johny come lately gold bugs a bloody nose? Watching your “investment” drop 200 bucks after you bought it on a spec would teach the same people who bought 6 houses to flip them 6 years ago, the same lesson once again. At some point, when the immigrant taxi or limo driver with 3K in his pocket, wants to buy gold, “So he can double it”…you have to just let them have it and walk away.
I personally would love to buy gold back at the 1300 level or even the 1400 level to start. Right now its time to head up stream when every one else is headed downstream.
Again, I could be totally off base. I just know I like selling into new highs and fading the momentum traders looking for follow through. Six months from now, Gold could be higher. I have no pipeline to psychic ideas that are infallible. And neither does anyone else.
My idea here is to sell into this rally, looking for a 120 pt win, while only risking 15 to 20 bucks on a wrong idea. If we risk 20 to potentially make 120, then that’s a 6:1 risk reward ratio.
If I am wrong, so what? But experience has taught me that when the talking heads on TV and the nut jobs on the right and the left on AM radio get all frothy about a subject, its a good opportunity to step aside. Let em have what they are clamoring for. Sell it to em.
Like the Japanese buying Rockefeller Centre and Pebble Beach in the 1990’s, or any other over done activity, when you own something looking for the greater fool to sell it too, look in the mirror.