Gold Is All Over The Place

I've been charting GLD since October 2008, looking for a good entry point to buy more. On 10/22 a TD Buy Setup was completed, but the TD Buy Countdown only got to 8 of 13 before the countdown was canceled on 11/28 by a completed TD Sell Setup. I have been waiting until countdowns finish (reach 13) before buying, since buying at the end of a setup only is far more aggressive.

But that sell setup that was completed in November didn't get a chance to finish its countdown before it was canceled by a completed TD Buy Setup on 1/15/09. That Buy Setup was only one day old (the countdown hadn't even started yet) when the TD Sell Setup began and was completed this afternoon 1/30/09.

While the other indexes have been completing both setups and countdowns, the GLD price has been too volatile to come anywhere near completing a countdown. Yet, if I had traded at the end of each setup, I would have profited.

Currently, my position in GLD is at a net profit of about 7.45% (not annualized). We just finished the TD Sell Setup today. So I have to choose whether to take profits now, or take the chance that *this time* the prices will continue to rise until the full countdown has completed. The only thing I see that is different this time, is that the Sell Setup actually closed above the resistance price. I think this is a signal that prices are no longer going to be rangebound, and that this is a true rally move. But I'm not sure. I'll have to read the TD book again to get a better sense of whether I should take profits now or not.

On one hand, I'm looking to BUY more gold, not sell it, but on the other hand, I'm looking to take profits when they are presented and not necessarily hold onto investments "for the long term" when that means holding them when they're going down. And if GLD continues its pattern of reversing near the end of each Setup instead of waiting for the full Countdown, then I should definitely sell now, and buy back in a few weeks when it's fallen back down. But just because a pattern has repeated in the past doesn't mean it's necessarily going to repeat again in the future.

I guess I'm leaning towards taking profits. I only pay $9.99 per trade, that's less than the cost of a glass of nice Chardonnay, so it's not a prohibitive factor. And if I want back in, I can just buy it back. A $20 lesson in how this indicator works at worst, a chance to increase my profits at best. Although in this particular case the profit is complicated by the fact that some of the GLD profits are long-term, others short-term, and if I bought back stock within 30 days there is a chance I would have to pay tax on the gain even if the money was reinvested due to the wash-sale rules. Where if I just held it long-term, I might even be able to hold it long enough to get long-term capital gains treatment on the whole lot of it (15% tax vs about 35% tax, so it's a big deal). Hmmm.