Gold Nears Apex of Triangle Pattern

Aug 30, 2009: 8:09 PM CST

For anyone who has been following gold prices lately, you’re probably aware of the dominant triangle pattern that is reflecting a lengthy consolidation in price.  Let’s take a quick look at that pattern and what the potential upside and downside targets will be with a solid break of the pattern.

The symmetrical triangle pattern began in early 2009 and will likely still be the dominant pattern as we enter September.

Traditionally, we would expect a break-out move as price nears the apex, or point where the two converging trendlines intersect.  On any price breakout of this range – beneath $940 or above $970 – then we would add  or subtract the height of the triangle from the breakout zone.

Should price break to the upside – which seems to be the dominant opinion – then the upside target would be near $1,200 ($1,170).

On a downside break, price would have more support levels (from higher timeframe moving averages and Fibonacci retracements), but an eventual target would be expected to be the $750 range.

Take a quick look at the 3/10 Momentum Oscillator to note a momentum consolidation (or range consolidation) in the oscillator – watch for a break here to indicate a likely range expansion move as well.

Under the principle “Price Alternates Between Periods of Range Expansion and Contraction,” we would expect some sort of impulse or sustained move to form out of this consolidation pattern upon any confirmed break.

In each week’s “Intermarket Report,” I analyze the structure and opportunities on the Monthly, Weekly, and Daily frame not just of gold, but of the S&P 500, Crude Oil, 10-Year Notes, and the US Dollar Index.  Please take a look at our new subscription services for more information.

Let’s keep a neutral stance until we see signs of a price breakout.

Corey Rosenbloom, CMT

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  • As the consolidation inches towards the triangle apex, does it mean that the closer the breakout is to the apex, the weaker it should be considered?

  • My count for gold and all these correlated markets is that they´re going through a corrective wave and that wave is composed of an ABC pattern. For equities we may be nearing the C, while for currencies and the metals we´re nearing completion of a B and have another C leg down. It may be a C flat for the metals which means they´ll base up readily and rally to new highs in a primary 3 on any sign of the dollar topping.

    This is a revision of my previous sentiment, which is that the wave 3s on the metals were more immenent with a series of nested 2s playing out the rally this year. That count still may be right, thats what limit orders are for.

  • Shanghai is down over 5%

  • Note: My avatar is that of a Bull taking a crap.

  • Hahah!

    Love it!

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