Gold prices, crude oil and Apple i- watch. How to trade gold around 1150?

There is much talk about the strength of the dollar and therefore a massive pressure on gold prices (among other commodities). There is no sign for the greenback to relax, unless something happens with the job numbers, the interest rates in the US or the equity markets. Discussing these fundamentals can be exhausting as your guess is as good as mine and the guy next to Ms Yellen.

Don’t forget crude oil
Crude oil under pressure means commodities under pressure and deflation spirals at work. It is remarkable how the king of energy is impacting importer’s economies by lowering the budget deficits. Basically, if you spent 60 billion dollars importing oil in 2013, now you spend 40 billion dollars importing the same amount. This, in theory, should give these economies more flexibility to buy other “goods”, as now, they have more money to spend. A different approach could be to import more oil (if you have where to store it as China does). However, deflationary pressures might weight more on gold than on energy. Why? Well, to begin with, you will always need energy, you will need it now and you will need it in the future. Gold, if you are India as an example, it’s great to buy it later… cheaper if you can delay the purchases.

Watch apple and the i-gold
Apparently, Apple inc. is in the business of buying a sizeable amount of gold to build their wrist watch. According to MoneyMorning.com, the new devices "won't just be the most sought-after gadget of the year", but also "the world's biggest gold price catalyst of 2015". This is because, there will be a luxury version of the watch with a case made of the metal and if the sales projections are close to become a reality, apple could buy a third of the world’s gold production. As you know from experience, if Apple does this, what about Samsung, HTC, Nokia. If the watch succeeds we might be entering the era of the i-gold! All of these sounds surrealist, since at the end of the day, Apple might not use as much of the metal at all. It is, however, an eyebrow rising discovery if it materializes. But enough of fundamentals.


Weekly chart
Support at 1150, and we are there. It is a level to watch. At this level, the risk/reward is at its lowest, set a stop at 1140, and a take profit at 1175 which is the 38,2% fib retracement from the high of 2nd March. This trade is best visible if you are using the weekly chart.

Daily chart
Look at end of February, after a fast drop in prices, there were a few “relaxing days” that are normally low in volume. After that, the trend resumes and we see a lower low. I expect this to repeat once more before the i-watch is out in the market (joke or not a joke). The daily chart can give you a better entry than the weekly for obvious reasons. After you have taken profit at 1175, sell with the aim of taking a profit at 1150 (if you want to play it conservative), and lower if you believe in a lower low. The stop loss in this case is more complex to set. We need to see how the Parabolic SAR develops. That is your trailing stop.

Thoughts for Brent Crude oil around 60USD/bbl - trading idea

The week starts on Wednesdays because that is when the EIA weekly petroleum status report is issued. The report gives a detailed overview of how much crude is used in refining, and more important, gives a number for crude build/draw in/from storage.

This is one of the main fundamental pieces of the crude oil puzzle these days. The other pieces would be the Baker Hughes drilling count report on Fridays and the Iran-US discussions. Not to mention, the Ukraine-Russia situation, Lybia disruptions, increased demand from Asia and finally but not less important, delays in the loadings at Basra.

Now, you know exactly how to trade this crude oil, don’t you?

Well, I don’t, but I have a plan I am going to share with you.

From some time now, we have been buying on dips, that is, every time crude falls (especially on Wednesday), we buy and sell a few days later. However, since last week we have changed our views.

It looks like the market is more balanced. Demand has awakened in Asia, problems in Iraq loadings (long line of tankers waiting to be loaded), and some refinery problems here and there, plus maintenance. We see, from the technical side, that the market is failing to reach new highs and it looks like it might get stuck on a 57 – 63 range. Basically +/- 3 dollars around 60.

Crude oil benchmarks, call it Brent or WTI, have a tendency to muddle around big round numbers. On Brent, we spent and average time of 8-9 trading days at  80/70/60 on the way down. The exception was  85 where we stayed 19 days before moving towards 80. We also spent about 14 trading days around 50.

We have started to visit the 60 level (+/-3) . We have been there for 10 days. Are we about to move sharply?  If so, where to?

I am not in the business of predicting anything, therefore I am simply selling 63 and buying 57ish, with room, so 62 and above I start to sell, 58.5 and below I start to buy. This is the plan, to milk the range until it is exhausted. The problem now is that I think there are more bearish fundamentals out there, but the technical picture seems bullish. I will lose one of these days, so my stop loss is entered every time I enter my trades 63.5 when selling and 56.5 when buying.