Happy New Year everyone!
Every Monday, we talk about unusual options activity. We do this to spot clues on where the big money is placing its chips, giving us an edge on the market. That’s why it’s my favorite type of unusual activity to track. But it’s not the only kind of unusual activity we can spot. Often, I can spot unusually large trades just by looking at the stock volume. So throughout the new year, I’ll pull in different insights on unusual trades — from options or stocks — to pick up on big movers in the market. At the end of the day we’re looking for directional bets with a big sum of money behind them. And the trade I’m seeing today has nearly $50 million on the line. It’s just an equity trade, meaning they bought the stock, but that’s still an unusually large bet for this particular asset. One that you probably didn’t have on your radar heading into 2022…$50 Million on the Last Thing You’d Guess
This bet was placed on a gold ETF, the iShares Gold Trust (IAU), and it was worth $48,258,000.
That’s not chump change by any means. Keep in mind that since this is a stock trade, million-dollar moves are common. But once you approach $50 million and above, especially on a gold ETF, it’s a bit more unusual. They scooped up 1.4 million shares of IAU at $34.47 apiece. This is not your average afternoon trading. And I think I see exactly what they are positioning for — a major breakout.(Click here to view larger image.)
IAU has been trending in a wedge pattern for a year now. These are considered periods of accumulation or distribution, where traders are either loading up for a breakout, or selling their holdings to avoid a crash.
Well, we know at least one large trader is accumulating a ton of shares right now, and it was enough to catch my attention. Keep in mind, this trader likely isn’t going all in, even at nearly $50 million. They likely manage hundreds of millions, and get to spread it around. But they made the call to pour money into gold right now, and it’s looking like a great time to go long IAU.Play the Breakout
Even though this is a stock trade, it tells us a lot about how to trade it with options.
First, it’s bullish, so we want to use call options to piggyback on the same directional move. But, seeing the wedge pattern form, it means we want to play a breakout, and buy on any dips near the support range. This $50 million stock trade likely put a new sector on your radar for 2022. Plus, it gives us multiple entry points with options as we watch IAU throughout the year. One trader’s unusual move into gold is prompting us to take action on multiple levels. That’s the kind of opportunity we’ll continue to look for in 2022. And we’ll keep an eye on gold’s action as we move throughout the year. Regards, Chad Shoop, CMT Editor, Quick Hit ProfitsChart of the Day:
The Beginning of the Gold Breakout?(Click here to view larger image.)
Let’s take a closer look at IAU… observed recently, the chart of gold remains tightly coiled. The momentum indicators are basically neutral and just following along with the price action. In last Friday’s session we closed right on the long-term horizontal resistance, but this morning we’re trading back down toward the bottom of the pattern. But the main thing I’m watching are these moving averages. On the weekly chart, we have the longer-term (50-week) moving average crossing above the shorter-term 9- and 20-day exponential moving averages. They’re all rising in tandem. This isn’t the clearest signal of a trend change. Normally you want to see the short-term EMAs cross above the longer-term MA, with the stack of lines going from shortest to longest-term from top to bottom. But what we see here is promising. If gold is going to chop around a bit more and bounce off the rising bottom support line again, that should just provide more time and a better price to enter a bullish gold position. And if we see the moving averages moving into the right configuration, especially on this weekly time frame, we could be in for a period of much higher gold prices in 2022. Regards, Mike Merson Managing Editor, True Options Masters
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