A MidWeek Look at Gold Daily Chart

Mar 5, 2009: 1:01 AM CST

Gold prices have been confounding both longs and shorts, particularly in a climate of economic uncertainty.  Let’s take a look at gold’s daily chart and see a basic technical analysis 101 pattern that’s currently containing the price structure in gold.

Gold Daily Chart:


(Click for large image)

Despite all the Elliott Wave, Fibonacci, Cycle, Indicator, and other chart work done on gold, we see gold prices have been contained nicely - so far - in an upward rising trend channel since November 2008.

It seemed all but certain that at least a pullback was due when prices challenged the $1,000 per ounce level, which is exactly what we got.  Notice the flat-line divergence that set-up as price challenged the $1,000 level.Price has now retraced and is challenging support at the rising 50 day EMA… and if the 50 fails at $900 (which also serves as round-number support), then gold prices should be expected to find support at the rising purple trendline around $880.  If gold cannot find support at $880, then odds would shift to favor a retest of the $720 level.

For the time being, odds seem to favor higher prices yet to come, as a new momentum high on the weekly chart has formed and gold is currently in a confirmed uptrend on the daily chart.  Holding above $880 is key to any bullish argument in gold.

For now, keep focused on these prices and let’s watch as the structure continues to develop.

Corey Rosenbloom
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade
Register (free) for the Afraid to Trade.com Blog to stay updated

  • Digg
  • del.icio.us
  • Facebook
  • E-mail this story to a friend!
  • StumbleUpon
  • Technorati
  • TwitThis
  • Yahoo! Buzz
  • ashrafjamal
    Where gold stocks are going in a short term,1) this week, 2)next week, and 3)a week after
    for example stocks, ego, gg, gld, aem, abx, au, etc.........
    what the profesional think
  • Anonymous
    - Last comment also from Win
  • Anonymous
    C,
    I've been watching gold very closely, and for a while, it was very close to the inverse of the market. Today's strength in the face of rising equities -- or rather, along with equities, though, broke that trend -- shattered it. And today's strength came with rising volume. In fact, I think I see an inverse H and S pattern on the 15 and 30 minute charts.
  • Anonymous
    Corey,
    I've been watching gold very closely, and for a while, it was very close to the inverse of the market. Today's strength in the face of rising equities -- or rather, along with equities, though, broke that trend -- shattered it. And today's strength came with rising volume. In fact, I think I see an inverse H and S pattern on the 15 and 30 minute charts.
  • Win,

    Glad to have you as a reader and a commenter!

    Today's action (price rejection and support on $88) is bullish, but you have to admit it's strange that gold is following the market like it is. The traditional interpretation - particularly in times of uncertainty - is that people flee into gold when the market falls and come out of gold and into the market when the market is rising (like now).

    Something to keep an eye on.

    But you're right - the $88 level (GLD) is critical for any bullish strength.
  • Colin,

    Hmm. I'll have to look more closely at the pattern.

    It's certainly not your textbook H&S; pattern but that doesn't mean it isn't right. A break of the neckline (at $88 on GLD) would confirm it but it hasn't happened yet.

    We'll keep watching - good call.
  • Anonymous
    Corey,
    Thank you for your blog. You provide a great service.

    I'm a long time watcher - first time commenter.

    I interpret today's action -- a violation of the head and shoulders pattern -- as very bullish. Do you agree?

    Win
  • Colin
    Corey,
    I have noticed a head a shoulders pattern forming between late feb (left shoulder) and now the right shoulder has just formed. With declining volumes, this surely a confirmation of the pattern?
  • RK,

    I'm so glad to hear that! That's why I do these posts - to try to be a benefit to readers as best I can, be it educationally or pointing out possible opportunities for additional consideration.
  • RK
    Thanks Corey. I made some dough today on GLD based on this chart and your explanation of it.
  • Dave,

    Good call. We're having a healthy bounce as I figured we might off the 50 EMA. Initial target - 20 EMA - is already achieved (for a scalp) and we'll head higher if we can break above EMA resistance at the 20.
  • Jeffrey,

    Good question - and yes it is. The GLD volume trend has fallen as price has fallen, which serves as a non-confirmation of lower prices and is quite bullish.

    In other words, as price has fallen, so has volume, which seems to indicate either normal profit taking is occurring, or sellers are not being aggressive, anticipating higher prices.
  • DaveB
    I noticed the same things and had the same trend channel drawn.

    I sold my DZZ yesterday when GLD got down to it's daily 50ema, it's gone down pretty fast and I figured it was due for a bounce soon.
  • hey corey, didn't see you mention the volume here...is that telling you anything?
blog comments powered by Disqus

Most Popular

Featured

AfraidToTrade.com

New Readers