Copper and Gold, A Great Pair
- Posted by Greg Harmon
- on March 18th, 2014
On one side, Copper ($JJC) did nothing but move sideways for a year until it took a nose dive last week. On the other side, Gold ($GLD) has been on fire since the beginning of the year and testing resistance. Two clear trends, well on their way. If you are not in them then you probably feel like you have missed the boat. But put the two together and there is an opportunity for a trade. The ratio chart below of Copper against Gold had been in a descending wedge until it also fell hard a week ago. The move took it outside of the Bollinger bands 6 days in a row and led to the RSI falling to the teens. This kind of extreme move should get your attention. It is the one that traders talk about when they say buy when there is blood
in the streets. And Monday it started to halt that decline, moving back into the Bollinger bands. Here is your opportunity for a quick trade. Buying Copper and selling Gold Short in a 4:1 ratio makes it nearly dollar neutral. The low of 0.2675 in the ratio can act as a stop loss and look for a target at a ratio of at lest 0.30, the horizontal red line that marks both the break of the wedge and prior support. With the ratio currently at 0.2725 that gives a 5.5:1 reward to risk ratio.
Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades from Amazon.
Dragonfly Capital Views Book Launch Celebration
Last week to join the Dragonfly Capital Views Premium Membership on an Annual basis for only $618.
This special Fibonacci rate (1000 divided by Φ) will be gone soon. Don’t miss this opportunity to join or upgrade! Sign up here. As part of this celebration, the first 25 annual subscriptions will also get the book*.
*book will be sent after payment is processed. It will also require you to send me your address for delivery.
Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through February 2014 Expiry and sign up
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
- Macro Week in Review/Preview February 27, 2015
- Is Your Portfolio Compatible with the Year of the Goat?
- Benzinga Premarket Talk Thursday Morning
- A Brief History of Trading and the Trading Stocks
- Premium Earnings 2-26-15
- 3 Reasons the Transports May Need to Refuel
- It Was Hard Saying Goodbye to Ruby Tuesday
- Premium Earnings 2-25-15
- Want to Short the US Market, Then Do it Against Germany
- Pancakes, Glue and Technicals – The Story of PerkinsElmer