Long-term gold trend still in play

Finally, from my technical point-of-view, these indicators that I love so much have carved out clear cut support and resistance lines. On the resistance side, the first area is the 20-day SMA (green line), the second area is the top line of the Bollinger bands (light blue shaded area), and the third area is the 50-day SMA (blue line). The key support is the bottom line of the BBs (light blue shaded area). For what it's worth I do believe this trend down will continue over the coming days and weeks. This is just my opinion based on my favorite technical indicators on this daily gold chart.

Daily February Gold Futures Chart

Monthly Gold Futures Chart 

OPTIONs PLAY

It is also important to note that trends can and do change at the drop of a dime with no warning whatsoever. So for those physical bullion buyers, in my view, buying gold on any sort of dip or pull back such as we are seeing now could work out very well in the long run. However, for options on futures over the next 45-120 days I remain bearish.

If the gold market continues to be in a long term "super-trend" down on the monthly chart and in a downward trend on the daily chart, there could be an abundance of potential option set-ups in my opinion. Everything from buying puts in a 3-to-1 ratio with a specific hedge for protection, to selling calls with unlimited risk. If the market trends sideways, we can still sell calls, but that requires a very well-funded account, has unlimited risk, and is not for everyone.

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About the Author
Matt McKinney

Matt McKinney is a full-service options broker at Zaner Group both buying and selling energies, metals, grains, softs, currencies and the 30-year bond market. My strategies include time frames of 45-120 days with the ability to liquidate at any time. I can be reached at mmckinney@zaner.com.

Whether you're a novice trader who wants to participate in options on futures or an experienced trader, you can also check out my blog at http://www.mmckinneyfutures.com/.

Futures and options trading involves substantial risk and is not for everyone.

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