October 25 Updating Gold into Key Support Target

Oct 25, 2012: 9:16 PM CST

In last week’s post on Gold’s chart, I highlighted the breakdown and new momentum lows which suggested a deeper retracement toward the $1,700 to $1,720 targets.

With gold achieving those downside targets this week, let’s take a look at the current key levels and note the levels to target on the upside if support holds, or downside targets if $1,700 suddenly fails.

Here’s the larger perspective daily chart:

With the divergences into the October high at $1,800, odds favored a price retracement to lower support.

Once price broke under the rising 20d EMA, the next lower support target became the 50d EMA at $1,720 and beneath that is the $1,700 “Round Number” Level.

That’s where we focus our attention currently in terms of the short-term picture in gold.

As we can see in the chart above, the $1,700 area is also the 38.2% Fibonacci Retracement as drawn and it’s a simple “Round Number” Reference level.

There’s absolutely no guarantee this level will hold which is why we craft “Support/Bounce” upward targets and “Breakdown” lower price targets.

A strong bounce simply targets the $1,740 level, and a firm breakthrough above that suggests that the larger trend has resumed to the upside, opening the pathway eventually to $1,800 again.

We’ll see that short-term odds seem to favor the “Bounce” logic, but if sellers suddenly resume command and break price cleanly under $1,700, we would need to look to lower potential support targets.

The next logical immediate support confluence develops at the overlap of the 50% Fibonacci Retracement and the 200 day SMA at $1,670.

It will be at $1,670 – should price break under $1,700 – that we’ll develop the same “Will it Break or Will it Hold?” logic.

The lower frame supports the “Bounce” Thesis unless we see a sudden break under $1,700:

Be sure to reference the intraday chart from the prior update to see a lesson that was played out in real time regarding the important Momentum Principle (momentum precedes price).

The new momentum lows on October 15th I highlighted did suggest that lower price lows were likely yet to come – they did.

The current intraday chart shows minor positive divergences as price challenges the support of the $1,700 confluence.

Today’s upward action and spike in momentum also tilt the odds to favor further upside action (the “Retracement” Thesis) and that’s what we’ll be monitoring into next week.

We’ll need to see price confirm the upward move with a breakout above the $1,720 short-term level and if so, we’ll continue looking for the $1,740 level as a minimum upside target.

Once again, there’s never a guarantee any support level will hold, so if you’re trading gold on the short-term frame, keep a keen focus on what happens at the current “Battle for $1,700.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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1 Comment

One Response to “October 25 Updating Gold into Key Support Target”

  1. Keith Piccirillo Says:

    Thanks for the post on the ancient relic.
    There's that support line on the daily that started thereabouts of Juen 29th that resolves itself at 1654.80.
    Seasonality is imminent for gold as well.