Gold has enjoyed a run this year. My subscribers have been able to trade it for profit a couple of times already. (You can check out my most recent gold trade review here.)
When stocks meandered at the start of the year, gold resumed its bull run, which began back in October 2022. Then, when stocks started tanking in late February, gold’s up move really started to gather momentum.
During two weeks in April, after the Liberation Day tariff announcement, gold rallied 16.5% – a huge move for gold. That added up to a 31% rally year-to-date.
But since topping on April 22 (where it briefly broke the $3,500 level), gold has been consolidating in a converging pattern.
So today, I want to check back in on the SPDR Gold Shares ETF (GLD) chart to see how things could play out from here…
Losing Conviction
After a flat period at the end of 2024, GLD resumed its rally at the start of this year. That underlying up trend appears in the 50-day Moving Average (MA, blue line).
Throughout that move, the 10-day MA tracked above the 50-day MA after crossing above it in January – another bullish signal. You can also see how the 50-day MA has acted as a support level during the rally…
Check out the chart…
SPDR Gold Shares ETF (GLD)
Source: e-Signal
After bouncing off the 50-day MA in April and May, GLD kicked off new legs of its rally. That coincided with the Relative Strength Index, a momentum indicator, rebounding from support at the 50% level (green line).
Yet more recently, I’ve been watching another pattern unfold.
You can see two orange lines on the chart that form a converging triangle. This can be a great pattern to trade.
When the swings get progressively smaller like this, you know that both buyers and sellers are losing conviction in their positions. Each swing becomes less pronounced as they start to abandon their positions earlier and earlier.
When the price action compresses like this, it builds pressure. And it can cause a stock to break out when that pressure uncoils. That can lead to tidy profits if you can catch the move.
And that’s why I’ve been watching other technical signals for additional clues…
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Holding Support
As the chart shows, the MAs have started converging. And the RSI has been bouncing along support (red circle).
Take another look:
SPDR Gold Shares ETF (GLD)
Source: e-Signal
The key catalyst for a breakout higher will be the RSI rallying off support – just as we’ve seen throughout this year.
If the RSI can gain traction in its upper range, that could prime GLD to break through the upper level of the triangle and potentially retest its April 22 highs.
But we also need to watch the MAs closely…
To break higher, GLD must hold support around the 50-day MA. Breaking decisively below it would negate any up move for now. We’d then look for the 10-day MA to accelerate above and away from the 50-day MA as confirmation of the uptrend.
These developments all look promising. But until clear breakout criteria are met, we’ll keep GLD on the watchlist for now.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
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