Gold Loses its Luster – Sell Signal Confirmed

May 14, 2008: 8:42 PM CST

With the US Dollar Strengthening, Gold prices have been falling lately and have officially confirmed a strong sell signal on the daily chart.  Let’s view this action:

Gold ($GOLD) Daily Chart:

There’s a few things I want to highlight on this chart.  I have literally highlighted (and expanded) the most recent sell signal in the contract.  Price is in a confirmed daily downtrend and the most recent swing down formed a retracement which terminated at the falling 20 period moving average.

To confirm this sell signal, price formed two doji (reveral) formations (magnified in the right corner) before forming a large red (sell) candle.  Price – via this development – is expected to travel downwards and test the rising 200 day moving average at $840 per ounce or even lower (provided the most recent momentum swing is closer to a bear flag development).

Adam Hewison’s “Trade Triangle” (indicator combination) technology spotted this development and he posted a quick 2 minute video entitled “Sell Signal in Gold” that I think you would find valuable.  Market Club members receive these and other videos and signals as they develop.  Adam is great at keeping you informed of developments you might otherwise miss.

Let me pull the perspective back for you to the monthly chart which provides a new potential price target before the trend could resume (although it will take some ‘backing and filling’ to get there):

The target is the rising monthly 20 period moving average at around $775 per ounce.  The weekly structure (not shown) supports this and gives a slightly higher target.

Either way, gold looks like it has slightly further to fall before it rises.  Continue to keep an eye on this important precious metal, as it has potential implications (bullish) for the stock market.

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