How PowerRatings Kept You Out Of Monday’s Gold Sell-Off
In today’s
PowerRatings
strategy we’re going to take another look at how you can use PowerRatings
to trade Gold. On November 18, 2004, streetTRACKS Gold Trust
(
GLD |
Quote |
Chart |
News |
PowerRating) was
launched. GLD is listed on the NYSE and trades just like any other ordinary
stock. GLD is designed to track the price of gold and is priced at 1/10th of an
ounce of gold.
The bull market in commodities has attracted many new investors looking to
increase investment returns. Until the launch of streetTRACKS Gold Trust the
only way you could trade gold was either through futures or by having to
purchase gold bullion, which incurs storage costs, etc. GLD changed all of that
by allowing anyone to buy or sell (short) gold. You can trade anything from 1
share upwards, so no matter how large or small your portfolio, you can have
exposure to gold — either for speculation or diversification.
Now that you understand the basics of GLD, it’s time to create a trading
strategy. And that is where PowerRatings comes in. Because GLD trades as a
regular stock, you can track it every day using PowerRatings. When GLD has a
PowerRating between 7-10 there is a high probability it will outperform the S&P
500 over the next 5 days and when GLD has a
PowerRating between 1-3 there is a
high probability it will under perform the S&P 500. That means you would look
for buy signals when GLD has a high PowerRating and conversely you may look for
sell signals when GLD has a low PowerRating.
In April
Gold futures hit a 25-year high of $600 an ounce. Gold then took less than a
month to hit $700 as momentum players were drawn in, along with investors who
flocked into precious metals as a hedge against inflation and the plummeting US
Dollar.
The chart below shows Gold’s parabolic rise, as measured by GLD. When GLD
reached new highs late last week, its PowerRating fell to 3 on Thursday and
Friday. Stocks with a PowerRating of 3 have historically underperformed the S&P
500 over the next five days. In the
TradingMarkets Strategy Guide we advise avoiding stocks with low
PowerRatings. Anyone that heeded our advice would have avoided today’s steep
decline.
For more information on streetTRACKS
Gold Trust go to
https://streettracksgoldshares.com
Click here
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attend a free
class on how to use
PowerRatings
presented by Steve Primo, our Director of Education.
Ashton Dorkins
Editor-in-Chief
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