A Look at a Key Price in Daily Gold
Jan 28, 2009: 11:41 AM CSTGold prices have been confusing traders lately, as most have expected gold to be surging in this environment while in reality, it is forming a downward-sloping consolidation. Let’s take a look at a daily chart of Gold Prices to see a critical area that could give us clues about the next swing in gold prices.
Gold Daily Chart:
Let’s start from the top. Price is in a short-term uptrend that started in November as price comes into prior resistance. However, on the weekly chart, Gold is in a down-trend channel corrective phase, so we have a conflict of timeframe trends.
The most obvious price point is the prior resistance around $920 per ounce that set in with a triple-top in early October 2008. Price tested the $920 level recently and appears to be forming a down-swing against this level, re-confirming this area as resistance. The most likely support zone for the current down-swing would be the confluence of daily EMAs around $850 per ounce.
Next, we see a Five-Wave potential fractal Elliott Pattern that took price from $700 to $920 – notice the wave labels in the diagram. An alternate interpretation of this move is the “Three Push” pattern which is a reversal pattern that forms as price makes three symmetrical swings in the same direction while forming a momentum divergence.
We have such a momentum divergence here, as price has made new swing highs while the momentum oscillator has failed to make three new highs, signaling possible weakness.
While it appears that the next likely swing would take price down to the $850 to $860 area (and then we’ll need to see what happens then to determine the next swing), price certainly could consolidate at resistance and break the $920 level. If so, we could see a rally that takes us to test the $1,000 per ounce high to test prior resistance from July 2008.
Keep watching Gold Prices for additional clues, as we stand currently on an interesting price juncture.
Corey Rosenbloom
Afraid to Trade.com
