Obscure Indicator Confirms Bullish Outlook For Gold

Chicago (Jan 21)   Ichimoku Cloud Points to Higher Gold Prices
SPDR Gold Shares (NYSE: GLD) closed higher for the fourth week in a row after a gain of 0.56% last week.

Gold is looking more and more bullish, and the Ichimoku Cloud chart below shows that GLD gave one buy signal last week and will give a second buy signal if it moves into the cloud.

Cloud charts are interesting and provide a forecast of the future. They are basically constructed with moving averages. Trade signals occur when lines cross. Last week, the Tenkan Line crossed the Kijun Line. The Tenkan Line is a 9-day moving average of the difference between the highest high and the lowest low while the Kijun Line is a 26-day moving average of that difference.

It is also bullish when prices move above either line (GLD is now above both) or when prices move into the cloud from below, which could happen this week.

Testing shows a high probability of a gain after the Tenkan Line crosses the Kijun Line. In testing, using a simple time exit by selling at a predetermined time after the buy signal, GLD has been higher more than 50% of the time over all time periods from one week to six months. Intermediate-term traders should consider that GLD has been up 70% of the time three months after the signal.