Sunday, June 28, 2009

Where is Oil and Gold Going?

Where is gold and oil headed? I am asked that question many times so I figured I would post my opinion on this issue. First off I want to say I am long term bullish on all commodities with some type of inflation on its way in say the next 18 - 24 months.

For the short term however in oil I am bearish, here it is top chart is a daily on oil, check out the long term rising trendline from the Feb lows. There is also a more steeper trendline formed that I didnt draw since May. However steeper trendlines dont seem to hold up as well. Then you see what I believe is a head and shoulders pattern that has formed the last couple of weeks, I expect to see a little more upside to complete the right shoulder if any, then a descent to test the horizontal support at approximately the $67. If it breaks next lower target is $58 which would be the rising trendline support off the Feb lows. At that level I think it would be an excellent play to the upside, whether you trade USO, DIG, DUG. Again I see oil trading in the $55 to $80 range for some time.

Next we turn our attention to Gold (Second Chart), I have been paying a lot of attention to it, I had taken a position in GLD a few weeks ago and played it up all the way to the horizontal resistance bar. Here is an inverted head and shoulders pattern on the weekly chart playing out over the last year or so. Watch that $1000 - $1050 level very carefully. If we do break that we are going MUCH higher, my target would be around the $1350 level! I do think that will happen in the near future the only thing that concerns me is the MACD indicator which has made a consective lower highs which is bearish. But I believe that it is only a consildation move to build enough momentum to finally take out that longterm resistance level and when it does watch out! Best way to play that breakout would be GLD on my opinion.