Even though assets have been selling off across the board in response to Wednesday’s Fed decision and the President’s announcement of increased tariffs yesterday, there is one bullish point to be found.  Yesterday, gold (GLD) had initially moved slightly lower around the open but then surged into the close, finishing the day only a couple of cents off of the intraday high. Not only did GLD fully recoup the morning’s losses, but it also gained back the previous day’s losses and then some. This outside day/bullish engulfing pattern is typically seen as a bullish technical signal.

This pattern has occurred a total of 35 times in the history of the Gold ETF (GLD). Below we show the 10 previous times that this pattern was observed after not having occurred in the previous six months.  Despite being a bullish setup, performance in the next week has actually had a negative bias with an average return of -0.57%. The past five times have seen a loss in the following week.  Likewise, three months out sees better than average returns but the probability of GLD trading higher is the just the same as a coinflip. But, generally, in the months and year after, GLD continues to trend higher on average with more consistent gains in the next month, 6 months, and year periods. Returns are also better than normal across these time frames. Start a two-week free trial to Bespoke Institutional to access our interactive Security Analysis tool and much more.

Print Friendly, PDF & Email