Will Gold’s Latest Rally Stick?

Sentiment extremes should be on the radar screen of all investors. That’s because they can point to buying opportunities and sharp reversals ahead.  The latest action in the gold market is a perfect example of this.

Just a few short weeks ago, year-end tax loss selling was in full force and universal hatred for precious metals (NYSEARCA:GLTR) took gold to bearish extremes. It’s these very bearish or sentiment extremes that can give investors and traders a safe entry point to go long.

Our ETF Weekly Pick issued on 12/26 wrote:

“Once year-end tax loss selling is over, we’re anticipating a bounce in beaten down gold miners in January. It remains to be seen whether this bounce will become a bigger trend change for Market Vectors Gold Miners ETF (NYSEARCA:GDX) from down to up, but it’s nevertheless a short-term profit opportunity for aggressive contrarians.  Our tandem options trade is to buy the GDX JAN 2013 20 call options (GDX140124C00020000) at around $140. The call options expire on Jan.24, 2014.”

GLD JAN 2014 Chart

Via our two intraday trade alerts, we bagged a 26.5% two-week gain on our GDX calls.

Since Dec. 19, SPDR Gold Shares (NYSEARCA:GLD) has rallied 3.17%, the Market Vectors Gold Miners ETF (NYSEARCA:GDX) has jumped 3.76%, and Market Vectors Gold Miners Junior ETF (NYSEARCA:GDXJ) is ahead by 7.13%.

It’s still too early to tell whether gold’s latest rally will morph into an official trend change reversal from down to up, but thus far, it’s been a good trade.

The ETF Profit Strategy Newsletter uses technical, fundamental, and sentiment analysis along with market history and common sense to keep investors on the right side of the market.  In 2013, 70% of our weekly ETF picks were winners and our biggest gainer was a 525% profit.

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