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The Precious Metal &
Energy Trading Report
by Chris Vermeulen
We continued to see precious metals
under pressure last week. The US dollar moved firmly higher on Friday which sent
gold & silver plummeting lower. Oil continued to drift to new multi month highs
while natural gas moved sideways.
Gold – GLD Fund – Daily Chart
The GLD fund has been drifting lower
towards my support trend line the past two weeks. I figure we will have some
action as we wait for a bounce off support or a break down through the blue
support trend line. Looks like we are a few weeks away from any possible setup
Silver – SLV Fund – Daily Chart
The Silver SLV fund has been moving
lower in a controlled manor. We could see prices pull back to the $13.50 level
this week. It looks like we are weeks away from any possible setup is silver as
Energy Sector – Crude Oil & Nat Gas
I have put together three charts to
show you what I think is very possible in the near term for Nat Gas prices. The
USO (oil fund) and the UNG (Nat Gas fund) have similar price movements. In short
these funds move with the price of their underlying commodity (oil or gas).
Because these funds must purchase futures contracts which allows the fund to
move with underlying commodity there are some issues with price performance. The
funds are affected buy Contango (search “What is USO contango” for more info).
In simple terms it means the price of the fund loses value over time and does
not track the exact same price performance as the underlying commodity.
These funds must purchase futures
contracts and because of the popularity of these two funds they are now large
enough to move the commodity price when rotating from one future contract to the
next on a regular basis. This helps boost the price of the commodity when the
fund rolls over to the next futures contract.
That being said we are now seeing
the same issues and price pattern we saw in USO happening in the Natural Gas
Fund UNG. Check out the charts below.
USO Oil Fund – Before the Rally –
The USO fund started to become very
popular back in January and volume surged to new highs. This was an early
indicator that the trend was getting close to reversing. The increase in demand
for this fund became so large that it was actually moving the price of oil as it
rolled from one futures contract to the next.
Gas Fund – Current Price (Before the Rally J )
By simple looking at this chart of
gas and the USO oil chart above you will see the similarities. Demand for the
commodity fund is incredibly high indicating a change in trend is getting close.
This increase in UNG demand forces the fund to buy more Nat Gas futures
contracts and the price of gas becomes much more volatile when the fund buys the
new futures contract.
It is important to notice what USO
(oil) did after this surge of volume and price pattern was broken. This is
provided on the next chart of USO.
USO Oil Fund – The Rally – Current
The price of USO dipped one last
time breaking down from its pennant sending price sharply lower only to reverse
the following week which was the start of this powerful rally we have been
enjoying for several months now. I expect we will see something like this happen
with the UNG fund as well.
Gold, Silver, Oil and Nat Gas
Stepping back and taking a simple
glance at these commodities we are able to tell if we should be taking action or
sitting back and waiting for some low risk/high probability setups.
I do like each of these commodities
and investment vehicles for short term trading. But I must resist buying them
because I like them and stick with my plan to only enter a position when I have
a low risk/high probability setup available.
It is easy to create a trading
strategy/plan but following it is a completely different story. Once you can
follow your strategy, then you’re ahead of 95% of other traders. I will admit,
I’m really excited about this UNG setup which looks to be forming, but I am not
jumping in and buying it yet. I follow my trading strategy/rules very closely
and because of my strict rules and 3% risk style it’s some times painful waiting
for an entry. But I have mastered the way I trade and my yearly goal is to have
10-25 trades yielding 2-10% profit each.
If you would like to receive my
trading reports please visit my website:
Vermeulen is Founder of the popular trading site
There he shares his highly successful, low-risk trading method. For 6 years
Chris has been a leader in teaching others to skillfully trade in gold, oil, and
silver in both bull and bear markets. Subscribers to his service depend on
Chris' uniquely consistent investment opportunities that carry exceptionally low
risk and high return. Reach Chris at: Chris [at] theGoldAndOilGuy [dot] com
This article is
intended solely for information purposes. The opinions are those of the author
only. Please conduct further research and consult your financial advisor before
making any investment/trading decision. No responsibility can be accepted for
losses that may result as a consequence of trading on the basis of this