Gold GLD Still Standing on Precipice of Chart Support

Jan 14, 2011: 2:34 PM CST

I wanted to give a quick chart-based update to my prior post this week “Key Daily and Weekly Price Level to Watch in Gold GLD” which goes into a bit more detail than this quick update.

It’s rare to have such a major commodity ‘hanging out’ at such a critical key level from the technical analysis perspective.

Let’s start with the Daily and move to the Weekly chart:

Cutting right to the chase, Gold – seen in its leading/popular ETF GLD above –  broke under the critical 50 day EMA recently and today fell back under it after a sharp down-day yesterday.

It’s now at a critical support level which builds from the daily prior price level and lower Bollinger Band at $132 (and weekly EMA as we’ll soon see).

Going a step deeper than the price and EMAs (price is a more important technical factor than ANYTHING), we see an ominous negative divergence in both Volume and Momentum – not bullish.

So it’s all down to buyers for technical (chart) support at this level.

As I mentioned in the prior post, it’s neutral from the $130 level to $135; bullish (gold held support and ‘busted’ the divergences) above $136, and otherwise bearish for perhaps $125 under the $130 level.

The weekly chart gives a good perspective and also shows why $130 is important and why $125 is a potential chart target should sellers push price lower here.

We see the same structural negative volume and momentum divergences as non-confirmations, though price remains in an objective (undeniable) long-term uptrend (higher highs, higher lows and positively sloped EMAs).

The 20 week EMA (green) resides at $131, but let’s go ahead and call it $130 for good measure.

So, from an IF/THEN ‘price pathway’ perspective from the chart, a price breakdown under $130 targets the rising 50 week EMA at the $125 level ($123 currently).

Of course, a sudden bullish upsurgence in price negates these bearish signals, but it all comes down to how buyers and sellers interact at the critical $130/$132 level where we are now.

In gold (futures), the key level where we are now is actually $1,350 per ounce for the key daily level, then $1,300 for a subsequent “round number” level.

We’re still under both the 20 and 50 day EMAs on the daily chart ($1,384 and $1,375 respectively, as of this posting).

The weekly 20 EMA on gold prices to reference is $1,344, or just round it up to $1,350.

Keep watching these levels with extreme attention while we’re at them at the moment.

Corey Rosenbloom, CMT
Afraid to Trade.com

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3 Comments

3 Responses to “Gold GLD Still Standing on Precipice of Chart Support”

  1. Fibbtrader Says:

    Corey,

    Good post as usual. Question on how do you set the 3,10,0 settings on MACD. When I try those same settings on my TOS(ThinkorSwim) platform, I get nothing just blank. fast length = 3, slow length = 10 and macd length = 0 and averaget type 'EMA'.

  2. Corey Rosenbloom, CMT Says:

    Thanks Fibbtrader,

    Hmm – it varies per platform, but what I've started doing is eliminating the 'signal' period in the standard MACD, though Linda Raschke (popularized the 3/10 Oscillator and from whom I learned it) uses settings 3, 10, 16.

    Try 3, 10, 1 but the main idea is to look at the 3 and 10 period EMA differential.

    Also, if possible, change the EMAs to SMAs in the MACD calculation (closer to the original oscillator).

  3. Espressostretto Says:

    Just a rookie here–the TRIX(5,9) looks almost identical to the MACD(3,10,0) in my eyes.