Gold ETF is used by many for diversification of portfolio and is advised by financial advisors to a maximum of 10% of portfolio size. Its highly liquid investment and Gold ETF is the way go.
Above chart shows the Goldman Sachs Gold ETF Fund which can be used for investment as lumpsum or the more preferred SIP route.
The chart shows the Bollinger bands with 200 SMA as central line and I have taken 4 standard deviation around the 200 SMA.
Lets understand what we can interpret through the 4 std. deviations around it. Now everybody is familiar with 200 SMA and its use so I will not delve into it.
The above chart shows the standard deviation curve. The Bell shaped curve shows the various deviations. The first deviation is around 68 % Probability which means the price will be within this band for 68% of time. The second deviation shows 96% probability so price will be within this second band for 96% for time. Now here is an opportunity for all of us just to observe when price moves out of the second band. Since we see the third and fourth band contains only 4% time. So price is going to bounce back to the 96% zone soon.
The Gold ETF chart shows the price was between the third and fourth zone of 4% on 15.04.2013. It was there for few days more from 15.04.2013 to 25.04.2013 in panic days. This was the right time to buy this ETF or top-up your investment as this was a rare opportunity not to be missed.
Lets see what happened next. The ETF price bounced from the lows of 2392 on 16.04.2013 to hit the second deviation band at 2598. Still it was out of the 96% percent zone. There was second opportunity when price action touched the third deviation for support on 28.06.2013 with the low at 2377.22 another panic low. Thereafter price has not looked down and its been one way up. This second opportunity was confirmed by positive divergence on MFI and MACD shown in chart.
Currently we have hit the first deviation at 2921 and facing some resistance there. If it sustains above this level then it can move up to the second deviation at 3100. So use your discretion whether to book profits here or hold with suitable stop loss as per your risk profile.
Happy Trading !!!
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