Buy Alert: February 11, 2014

| February 11, 2014

Buy Alert:  February 11, 2014


Option Strategy:

Buy iShares COMEX Gold Trust (IAU) April 2014 $12.00 Calls for $0.75 or better.


Commodity Outlook: Gold

Things are starting to look up for gold…

Since the start of the year, the yellow metal has risen a respectable 6.3%.

And believe it or not, gold’s gains came in spite of the fact former Federal Reserve Chairman Ben Bernanke recently announced additional US economic stimulus tapering efforts.

As you may know, many analysts believed the onset of tapering would put the final nail in the coffin of gold bulls.

But in reality, the opposite has been true…

Ever since Bernanke announced the onset of tapering in December 2013, gold has risen.

That tells me the Fed’s anticipated tapering program was largely priced into the gold market last year.  As a result, the path of least resistance for the yellow metal is now UP!

To capitalize on further strengthening in the gold market, let’s buy calls in the iShares COMEX Gold Trust (IAU).  When gold rises, so does IAU.

Here are the important details you’ll need for this trade…


Trade Metrics:

Underlying ETF Symbol: IAU
Call or Put: CALL
Expiration Month, Day, Year: April 17, 2014
Strike Price: $12.00
Current Bid/Ask Price: $0.55/$0.65
Maximum Buy Up To Price: $0.75
Maximum Risk Per Contract: $75.00


Here’s a breakdown of the important technical support and resistance zones in gold…



Exit Strategy:

Remember, we want gold to trade higher.  Our first profit target is the 200-day moving average (pink line) at $1,325 an ounce.  If the metal can break above that important technical level, we could see a run to the $1,400 area.

The risk control price is $1,240.  If gold drops below that level, conservative investors should consider closing this trade to reduce risk.


Category: Commodity Trading