The Big 3: GLD, COST, USO

Marlee Caden (0:02)

Welcome back to Trading 360 I'm Marlee Caden. It's time for the big three. We've got three stocks, three charts, and three trades for you. Kevin Green will be taking us through the charts. Here to take us through the trades today is Don Kaufman. Great to have you both with us. Don, would love to get your thoughts on what we're seeing here ahead of this bond sale. We've got the 10 year touching levels we haven't seen in two plus decades. How are you looking at the action this morning?

Don Kaufman (0:27)

Well, at least for today, the bonds have stabilized to a larger degree, but it's far from over. There's no question that the sell side activity specifically in the bond futures this morning definitely struck fear into the hearts of traders and even more specifically, saw the NASDAQ start to pull back a little bit as the bond market actually hit some of the lows. So as I said, we've stabilized for, well, right now, but this appears to be far from over.

Marlee Caden (0:54)

Yeah, it certainly does seem that way and we'll of course be keeping an eye on that sale in a few hours here. But let's dive into the big three here. You've got GLD as your first trade today for the big three. So what's your thesis on GLD right now?

Don Kaufman (1:09)

So GLD has actually seen a rather sharp pullback. Obviously, this has a lot to do with the US dollar as the US dollar is ripping to the upside, which has a lot to do with the bond market, of course, right? So people actually converting into dollars, that's actually in turn hitting gold to a larger degree. I think that this is well overdone at this point. It's a very sharp pullback from the 430 level down to the 380 level. As I said, I think the dollar is also overdone to the upside. I am looking for a tradable bounce, nothing more. I want to really emphasize that I'm not here about to get long gold. I am looking for what we term as traders, quintessential rip-your-face-off rally that is a pop back to the upside. I think that that's going to be tradable in the gold market.

To go ahead and trade that and to find risk, I'm going to go out to the Oc 30 options. Again, Oc 30 options, that's the October 30th expiration. I'm going to buy the 380 calls. Buying the 380 calls, selling the 385 calls against it.

That spread, it's $5 wide call spread, is done for $1.40. Deb, again, just short term bullish inside of gold, looking for that, again, quintessential rip back to the upside.

Marlee Caden (2:25)

All right, so looking for a short term move higher. KG, as you look at the technicals for GLD, are you seeing the possibility that we may rip in the near term?

Kevin Green (2:36)

Well, I think if we look at the one year daily chart, you could actually have that trade set up in the event that we actually go back down around that $360 level. And if you're looking at the chart, here's the reason why. We obviously have seen gold move to the upside or GLD moved to the upside around this time last year. We had a nice little breakout, but we've been making lower highs ever since. And now we had a predominant and impactful downtrend line from the highs that actually was broken after we consolidated a little bit back between July and early August. We retested the 200 day moving average, but we also then failed. We failed the 200 day, the 20 day, the 50 day, and we're kind of back within this trading range between 360 and around 384

But because of that consolidation that we had previously back in July, you could say maybe some buyers would be willing to step in around those levels, may not want to step in at these current levels. RSI making lower highs, making lower lows. MACD is trying to flatten out. I think that would be one of your first signals that a rip your face off rally and trying to retest some of those key moving averages could take place here. But Marlee, I would think that a firmer area of support probably sets up for a little bit of a better entry for a lot of the institutional investors than these current levels that we have right now, given the interest rate environment.

Marlee Caden (3:49)

All right, so looking just for a short term pop here, as Don highlighted, he is not going long on gold, just looking for a move higher in the near term. KG, as you look over a longer term chart for GLD, does the trend stay intact?