Trade of the week: long gold

(Video Transcript)

A good time to cash in on S&P 500 trade

Good morning and welcome to this week's trade of the week on Monday 27 November 2023.

Last week we went long the S&P 500 and we did so despite the S&P 500 being on track for its fourth consecutive week of gains which actually happened at the end of the week during the prolonged Thanksgiving weekend in which very little volatility was seen.

As you can see here on the daily chart we have very, very small candles here and nothing really much went on over the last few days. Now we did go long despite us having risen very strongly already and despite the market being overbought.

‘Overbought’ indicates a strong trend

But an overbought market is basically just a market which is telling you that there's a strong trend in place so that was why we just continued to buy into this strong uptrend.

But now that the upside momentum is declining and we can see shorter candles here forming maybe it might be a good idea first of all to raise our stop loss level to our entry level or just above our entry level which was at 4,500.

Perhaps we should even cash in our profits this time with a small profit around 52 points or so on the S&P 500, so that is a possibility. But if you want to let this one run you can but there is a greater risk now of at least a short-term retracement being seen.

This could perhaps take us back down again towards our entry level over the next few days or weeks but the trend is your friend and that is still pointing upwards.

Long the gold shines ahead

Which brings me to this week's trade of the week and the trend is your friend and gold is at the moment breaking above its October high of $2,009 and if we were to close on a daily chart closing basis above $2,009 today then I would like to buy on the close the gold price here.

I would like to do so with the view that we might actually, in the coming weeks and months be heading back up again towards the high seen back in 2020, 2022 and 2023 between $2,070 and $2,082 per troy ounce as you can see here on this weekly chart.

So that would be our upside target and our stop loss on this trade would be the last reaction low that is to say the low from last Monday at $1,965 per troy ounce.

So this week's trade of the week is to go long the gold price on a close on Monday above the $2,009 per troy ounce high seen back in October with a stop loss at $1,965 per troy ounce and an upside target of $2,075.