Now that gold has extended its August breakout, you need to use market-timing strategies to plan your buying and selling.

Today, I’ll reveal three buying opportunities you can exploit before gold pushes to new all-time highs. Specifically, I’ll show you buying targets for physical gold and fast-moving mining stocks. But first, let’s take a look at the power of the latest gold breakout:

When I first alerted you to gold’s initial breakout move, the sport price sat at $1,670. As of this morning, Gold trades at $1,773 — a $100 jump in less than a month. Back in August, I noted strong support at $1,575. This was the point where buyers swooped in at bargain prices in December 2011 and March-June of this year. Strong buying at these levels helped spark the momentum gold needed to begin its new run…

If you’re a buyer of physical gold, your next course of action should be determining where you might find buyable pullbacks. To pinpoint these important areas, we turn to a daily chart:

The most important thing to note right now is that gold is overbought and due for a pullback. I’ve included RSI (a momentum gauge) below the price chart that is registering a strong overbought reading similar to what we say when gold peaked near $1900 in July 2011.

So if we are looking for a pullback, where will gold stop and move higher?

It all comes down to some simple charting. Important support and resistance levels for gold happen to coincide with round numbers right now: $1,700, $1,800 and $1,900. For longer-term buying opportunities, I would immediately zero-in on a price closer to $1,700. As I’ve already pointed out, gold is running out of gas as it approaches resistance at $1,800. It will probably need to rest or retrace before attacking $1,800.

If and when a pullback occurs, give gold several days to a couple of weeks to move down and/or sideways. Eventually, the price will tell you where and when support will be. Once gold moves higher from its new support level, you will have found your low-risk entry point. If I had to guess right now, I would say you might have an opportunity to buy near $1,725…

Your second buying opportunity will come later when gold breaks $1,800. Again, the same rules apply for this breakout. Don’t chase the price. If you miss the initial $1,800 break, wait for a retracement back to a new support level and confirmation that gold is once again moving higher before you buy.

If you prefer shorter holding periods, you should look for opportunities in the mining sector. That’s where you’ll find your third buying opportunity. Here’s a look at a Market Vectors Gold Miners (NYSE:GDX) chart:

Like Gold, miners also appear overbought after a fast run-up. But that doesn’t mean you won’t fine timely buying opportunities in gold mining stocks. The secret is to go small…

Many smaller junior miners lag the performance of their large-cap peers. I’ve noticed several smaller mining stocks that are just now beginning to break out of nasty downtrends. This can lead to powerful upside moves and short squeezes.

In late August, I shared with you a chart of a smaller mining stock that was poised to break out. This is what it looks like today:

Vista Gold Corp. (AMEX:VGZ) is up more than 20% since it first started to break out earlier this month. If you perform a simple scan of the junior mining sector, you’ll find similar setups that are ripe for short-term trading.

Sincerely,

Greg Guenthner, CMT

Questions or comments? Drop us a line at trendplaybook@agorafinancial.com.

Related Posts

• March 25, 2013 -- Chart Wars: AAPL vs. BBRY
• August 24, 2012 -- How to Trade the Gold Breakout
• January 14, 2013 -- 3 Key Breakouts
• October 15, 2012 -- A 12-Year Breakout in the Making
• December 12, 2012 -- Beating the Market With Imperfect Trades

Greg Guenthner

Greg Guenthner, CMT, is the co-editor of STORM Signals and Penny Stock Fortunes. He is also the editor of Agora Financial’s Trend Playbook, a free resource for trend followers and technical traders. For close to a decade, Greg has led Agora Financial’s small-cap division, where he founded one of one of the only independent OTC research advisories in the industry. Greg specializes is classical trading techniques and combines timing strategies with his fundamental analysis of small-cap stocks.

He is a member of the Market Technicians Association and hold the Chartered Market Technician designation. 

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