On New Year's Eve I wrote a post titled "Why I Bought Gold Today" in which I discussed some reasons why I purchased February gold futures and highlighted some of the key technical levels that I was focused on. This morning I exited this trade at $1210 for a $25.70 gain ($2570 per futures contract).

This gold trade turned out to be very instructive for a number of reasons and I also would like to explain some of my rationale for closing the trade:

GC_hourly

The small oval on the left of the chart is where the trade was entered and the larger oval at the bottom was the tricky spot on Friday January 2nd where the position was almost stopped out. One of my biggest trading breakthroughs was the implementation of stop losses based on closing bar prices. On December 31st I wrote:

"I am looking for a $50+/oz gain on this trade and I will be stopped out of the trade on an hourly close below the $1170 level."

This was a very key part of the trade as one can deduce from the above chart, the trade came within minutes of being stopped out a couple times. Once the large bullish bar took price above $1190 it was simply a matter of letting the position work itself and raising my trailing stop as price gradually moved higher.

This morning I closed the trade for a couple of reasons:

  • At $1210 I view risk & reward to be balanced with support at $1190 and resistance near $1230
  • Judging by the recent rally in the gold miners sentiment on the gold space is not nearly as depressed as it was a week ago (the latest CoT report which was released yesterday also does not support the bullish gold thesis)

The overall technical picture for gold remains constructive as does the seasonality which will continue to offer a tailwind through mid-February. I will be looking for an attractive pullback setup to the $1190-$1200 area in order to get back in. It should also be noted that the GDX which just last week was mired in a messy consolidation, is now 8% above its 50-day moving average and threatening to break out from a multi-month bottoming pattern:

GDX_1_6_2015