In trading, timing is everything. Catching that massive breakout move that can deliver life-changing gains is the dream of every trader. And according to veteran trader Rick Pedicelli from Morpheus Trading Group, we may be staring at just such an opportunity right now in the gold market. Read on as Rick breaks down this potential “trade of the year” setup.
Have you been patiently waiting for that perfect, low-risk entry to get aboard the next big market move? Well, according to Rick Pedicelli, head stock analyst at Morpheus Trading Group, the opportunity you’ve been hunting for may have just arrived in the form of a monster breakout in gold and gold ETFs like GLD.
Rick, a 20-year trading veteran, believes the recent smash through resistance to new all-time highs in the gold space could be the starting gun for a massive trend run coming off a multi-year consolidation period. And in this post, he’ll walk us through his analysis step-by-step, revealing specific price levels and techniques to capitalize on this potential “once-in-a-decade” opportunity.
The Big Picture: A Decade-Long Base is Breaking
To understand the full scope of this setup, we need to go back and look at the long-term monthly chart of gold. On this timeframe, Rick points out, the price action “speaks for itself”:
- For over 10 years after the 2011 highs, gold traded in a massive basing pattern, testing and failing to break through those lofty peaks on multiple occasions from 2012-2022.
- It wasn’t until late 2023 that gold FINALLY began showing strength, clearing the 2011 highs and entering a tight range just above that key resistance zone.
- Then in March 2024, the fireworks truly began as gold blasted through this multi-year chop zone, taking out the prior peaks from left to right in a powerful breakout move.
As Rick states, “It doesn’t get much better than that in terms of just a ton of energy stored up here in the past few years and the price just busting through a big level.”
When you consider the length and tightness of this decade-plus long base, it highlights the potential energy that could be unleashed now that gold has cleared this stubborn ceiling. As the saying goes, “the bigger the base, the higher in space” – pointing to the possibility of an explosive longer-term uptrend if this breakout holds.
Finding the Ideal Low-Risk Entry
Of course, as swing traders, simply buying the breakout near current levels isn’t the ideal approach according to Rick’s methods at Morpheus Trading Group. Instead, he advocates patiently waiting for a pullback to develop within the new uptrend to get a more advantageous risk-reward entry point.
Some of the prime entry areas to watch for include:
- A pullback to the rising 8-day EMA (the 9 or 10-day EMA works too depending on your preference)
- A deeper retracement to test the rising 20-day EMA
- Possibly even a flush to take out the prior breakout pivot area around $193 before resuming higher
The goal, as Rick explains, is to let the price action provide a lower-risk entry point from which traders can set a reasonable stop-loss, rather than simply chasing the breakout at current levels.
Rick notes that given the magnitude of this long-term breakout setup, taking an initial “position trade” entry now isn’t a bad approach, as long as traders are willing to give it plenty of room by setting an wider stop-loss, such as:
- Below the rising 50-day MA (which is also conveniently below the $193 breakout pivot area)
- Or by using the February lows as your final ‘line in the sand’ stop level
Taking this position trade entry approach provides some breathing room and allows you to have some “mal positioned” size on the trade to take advantage of the upside. Rick suggests that as long as the price action is holding above the 20-day EMA, additional entries on weakness can still be taken from there.
Key Takeaways
To summarize the core points covered:
- A major breakout is underway in gold and GLD after over a decade of basing/consolidation
- This is a potential “once-in-a-decade” opportunity given the length of the base
- For optimal entries, wait patiently for pullbacks to the 8-day or 20-day EMAs
- As an alternative, take an initial position trade entry now with a wider stop below $193
- Trail stops under the rising 50-day MA or use the February lows as a final ‘line in the sand’ stop
- Stay disciplined, manage risk, and be ready to capitalize on the next major gold uptrend
Having covered the key trading takeaways, let’s recap the overall game plan that Rick outlines in more detail:
The Position Trade Approach
While GLD isn’t offering a fresh, low-risk swing trade entry at the moment, because of the magnitude of this breakout from a powerful 3-year base, Rick suggests taking a more conservative “position trade” approach can be warranted.
The idea is to:
- Buy some initial shares around the current $200 area
- Then add to the position on any weakness back to the 8-day EMA over the next week
- And potentially double-down again on a deeper pullback to the rising 20-day EMA zone
Rick’s rationale is that the massive energy from this long-term breakout could easily support a 15-25%+ advance from current levels. So while position trading often requires keeping wider stops, the large potential reward on this setup makes it acceptable.
The important keys with this approach are:
- Only taking partial size at a time to limit initial risk
- Averaging in more shares on any near-term pullbacks
- Maintaining a reasonable stop under the February lows or below the rising 50-day MA
As Rick summarizes, “the price action on this breakout should hold above the 20-day EMA and should not pull back into the 50, especially with the 50 below the breakout pivot.”
By being patient, keeping risks controlled, and letting the uptrend confirm itself, traders can maximize their chances of catching the entire move if this breakout does continue powering higher as anticipated.
Key Takeaways (revisited):
- Multi-year breakout = potential multi-year uptrend
- Wait for pullbacks to rising 8-day or 20-day EMAs for entries
- Consider taking initial position trade entry with wider stop
- Trail stops under rising 50-day MA or Feb lows
- Stay disciplined and let uptrend confirm before adding more size
Does this analysis of a potential “once-in-a-decade” trading opportunity in gold/GLD resonate with you? If so, head over to MorpheusTrading.com and check out Rick’s stock pick services to accelerate your trading success! And let me know if you have any other questions.
The following VIDEO is a MUST WATCH!
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