We’ve written ad nauseam about the bearish case for gold.

The 30-year commodity cycle has peaked…

Fed printing isn’t causing inflation…

Investors are looking for income, not metals…

All the while, I’ve told you to sell into rallies. And today’s a perfect time to do that.

Here’s a chart of gold futures, showing a classic example of how significant market levels – support and resistance levels – tend to work.

See larger image

The saying goes, “Support, once broken, becomes resistance.” And often, these levels tend to appear at round numbers.

Since April, $1,350 has been the make-it-or-break-it level for gold. This is the price at which gold initially found support after dropping $200 per ounce in two days!

After a brief rally – a mere dead cat bounce to $1,450 – gold rolled back over and retested the $1,350 support level, which held as prices dawdled sideways for about a month.

Then, on June 20, gold fell through $1,350 like a rock down a well. By June 28, gold futures were trading under $1,200 per ounce – the downside target I established for gold when it first fell under $1,550.

Now, after drifting higher through July, gold futures are trading back up to this all-important $1,350 level. While $1,350 acted as support before, it’s likely to act as resistance now. That makes it a great time to get short gold.

With current prices around $1,320, place a stop-loss order $40 higher, at $1,360. This “hides” the stop above the $1,350 resistance level.

If gold breaks through $1,350 to the upside, quickly ditch this short position and wait for another tactical entry opportunity.

As far as profit potential goes, gold should easily fall back down to re-test $1,200. That puts $120 of profit potential under the current price, or three-times the amount we’re risking… a la, a reward-to-risk ratio of 3-to-1.

Of course, we see gold dropping much further than $1,200. So take this guidance one of two ways… it can be a quick, short-term trade or a great place to get short for the long haul.

Either way, gold remains a seller’s market. Buyers beware!

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Adam O'Dell
Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.