I remember SPDR Gold Trust (GLD) being relatively boring in July. It was actually in a sideways move that month as I watched some Fibonacci time cycles that suggested a breakout one way or another. But, on July 25, a price decision was finally made when a gap to the upside took out the July 13 swing high. Our next move, therefore, was to consider buying on the next pullback. Some of these parameters were discussed in my late-August piece.
If anyone out there missed this move in the GLD, this old chart is not meant to make anyone feel bad about that fact. Rather, it's meant to explain my thought process for the next possible move in another chart -- that of MasterCard (MA), in which I'm seeing a similar pattern. After a fair amount of sideways activity, this stock is finally breaking out nicely above a prior swing high that took place Aug. 14.
This breakout tells me to look at the next pullback for a possible buy entry, as long as that pullback terminates somewhere above the Aug. 7 low at $413.18. The potential upside targets for a continued rally off that low, as illustrated on the daily chart, come in at $455.88, $467.50 and $487.95. The next question is how to enter a trade with these parameters in mind.
For that, I'm taking it down to a 60-minute chart, which will demonstrate how you might set up a pullback to the Aug. 7 low. Besides looking for at retracement back to the prior lows of at least a 50%-to-0.786 magnitude, I will also run some 100% projections of the prior declines and then watch those zones for a possible entry. At this point, the maximum risk would be defined as being below the Aug. 7 low. If that low is taken out, then this trade setup will become bust.
So, in the coming sessions, let's watch for a buy entry in a MasterCard pullback. Typically, I'll look at an options strategy here. I may be able to update some of these parameters in Columnist Conversation if needed.
For more information about trades and triggers, please refer here.