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Week Ahead: Commodities Analysis - GLD, SLV, USO

Commodities / Commodities Trading Aug 10, 2014 - 04:46 AM GMT

By: Richard_Cox


Precious metals markets have been showing strength as investors start to take profits in stocks (with prices still trading near record levels).  This has helped move money into assets like the SPDR Gold Trust ETF (NYSE: GLD) and iShares Silver Trust ETF (NYSE: SLV), which continue to rebound from their yearly lows.  Many of these rallies have been prompted by geopolitical concerns in Ukraine, Gaza, and Iraq

All commodities markets should see support from investors as long as these stories remain in the headlines.  Oil markets -- and the United States Oil Fund LP ETF (NYSE: USO) -- can still move higher on supply concerns, and gold and silver ETFs can move higher on safe haven demand for hard assets.  Metals traders and those using oil to express their market views will need to remain cognizant of the fact that we are likely to see the current climate of trading conditions for roughly another month, as September usually ushers in a much bigger surge of market liquidity.  Here, we look at the latest technical developments in gold, silver, and crude oil.


Critical Resistance:   128.80

Critical Support:   119.70


(Chart Source:  CornerTrader)

GLD / Gold Trading Strategy:  Wait for convincing break of the symmetrical triangle consolidation pattern.  RSI is rising, this suggests eventual break will be bullish. 

Market prices in GLD have shown clear signs of stabilizing after the more erratic activity seen in the early parts of the year.  This type of event leads to consolidation, and we will need to wait for a the next impulse move in order to get a convincing sense of where prices are headed next.  Most of the evidence points to an upside break, as the Daily RSI is rising and has plenty of room to extend before becoming overbought.  An upside break of 128.80 would confirm the bullish bias. 

iShares Silver Trust ETF (NYSE: SLV)

Critical Resistance:   20.60

Critical Support:   19.30


SLV / Silver Trading Strategy:  Trade the range between 20.60 and 19.30 until market momentum picks up and clearly breaks a daily support or resistance level.  Keep stops within 0.60 relative to market prices.

Things are looking less positive for SLV, as we can now see a clearly defined series of lower highs on the daily charts.  Prices have started to flatten-out just below 20 and we will need to see a moving-average break on the weekly charts before we can start to conclude that the trend has completed.  First resistance is now seen at 20.60 and traders can take short-term sell positions as part of a range trading strategy.  On the downside, support is now defined by the 19.30 level which also marks a suitable entry area for long positions.  These trends have also been confirmed by recent market analysis from Atlanta Gold and Coin.

United States Oil Fund LP ETF (NYSE: USO)

Critical Resistance:   38.10

Critical Support:   35.30


USO / Crude Oil Trading Strategy:  Sell rallies.  First resistance seen at 38.10, place stops above 39.60. 

The USO ETF has completed its prior head and shoulders pattern, which creates a bearish outlook on the Daily charts.  We have now moved through the 50% Fibonacci retracement of the bullish move that began at the beginning of this year, so this now places the focus squarely on the 61.8% Fib retracement of that same move (which comes in at 35.30).  Look to sell rallies just above 38, targeting 35.30.  This trade looks good in terms of risk-to-reward ratios, as 39.60 resistance is likely to contain prices for the rest of this month. 

By Richard Cox

© 2014 Richard Cox - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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