There is consolidation going on in Gold. Since making a low on July 20th at 1080.00, Gold has traded between 1079.20 and 1108.80 with a smack down to 1072.30 on July 24th. A ledge has formed and it has formed an outside day candle today and an inside candle for the week. This could potentially set up a break out for Gold. A move below this week’s low of 1079.20 could set Gold on a course to the Feb 2010 low at 1044.50. Closing above the 13 day moving average (1105.20) could lead to a test of the 21 day moving average up at 1126.20. I look to be short on a breakdown of the lows for a push to 1044.50 and long if Gold closes above the 13 Day moving average. The Candle setups on the daily and weekly charts could lead to a breakout in either direction. Look to go with the breakout. Place stops in accordance to your risk tolerance.
One option trade to look at calls for buying a Gold option strangle which calls for buying a put and call at the same time. I therefore propose looking at buying the September Gold 1130 put and buying the September Gold 1125 call for a purchase price of five points or in cash value $500.00. The risk on the trade is the price paid for options plus all commissions and fees. Keep in mind September option expiration is August 26th.
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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.