Gold bears need a close below $1,368, and bulls needs a close above $1,404.
On Thursday night, gold retested the Thursday session low of $1,368, which was put in early in the day. Friday's lower price action follows a rally off of the lowest level seen in four weeks, which allowed gold to get a marked close of $1,386.90 on Thursday.
On Friday morning, the low of $1,371 has provided some support, as gold tests the major $1,383.90 resistance and retracement level.
Thursday's recovery found major resistance against Wednesday's support shelf at $1,389. It will be important for the bear camp to see a close below $1,383.90, but psychologically, it will be more important to see sustained price action below $1,380.
The trend is clearly bearish, and action in the low $1,370s will likely break the camel's back and push gold to new lows. The next major support is comes in at $1,335.60, which was the low of a reversal day. Below that, gold is supported at the previous low of $1,321.50.
Price action above $1,383.90 will help the bulls gain some intermediate-term control. Although resistance will be found at $1,389 as well, sustained price action in the mid-to-high $1,380s will likely find buyers into the end of the week, bringing the market to the next resistance level at $1,396.20 to $1,397.
Given those levels, here are two short-term out-of-the-money options plays on the gold futures that you may want to consider. Bullish traders should consider buying the June 1,420-strike calls for $900, which provides 11 days of long gold exposure. Bearish traders should consider buying the June 1,335-strike puts for $1,000, which will provide them with 11 days of short exposure.
Whatever your bias in gold, futures options are liquid and trade nearly 23 hours a day.The idea here is that in a volatile market, options can be used to trade with calculated risk.
Good luck and good trading.
