Tuesday, September 29, 2009

How to Time Gold Stocks Using the BPI

Some interesting trading research and musings by Jeff Clark today, as he describes a method to time the buying and selling of gold stocks.

Clark's found that when the eight-day moving average crosses above the bullish percent index, it's time to buy - and when the converse happens, it's time to sell, or go short. It's a twist on the popular method of timing stocks using the BPI. Clark says a little adjustment is needed for gold stocks, due to their huge volatility.

I personally have become fascinated with these sentiment indexes recently. Over the weekend, I perused the Wall Street Journal, and concluded that at least anecdotally, gold seemed to be a little too popular right now.

Is the dollar a doomed currency? Of course it is. The problem is that everyone knows that right now. And when everyone is on one side of a trade, you know the other is due for a mega rally. Since it's tough to picture a scenario where both the dollar and gold rally, it may be wise to be cautious on gold for now, especially if you believe the buck is due.

Gold's latest assault on $1,000 ran out of steam soon after crossing the goal line -
at least for now.
(Source: Barchart.com)

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