Updating Traps Trendlines and Fibonacci for Gold and GLD

Jul 31, 2013: 11:29 AM CST

Let’s take a moment to update the prior post “Trade Planning and Levels to Watch in Gold” with respect to the new price compression between daily moving averages, a key Fibonacci Level, and an active trendline all aligning at the same level.

We’ll start with the broader Daily Chart:

Gold Daily Chart Technical Analysis Trend and EMA Compression Price Levels

First, let’s focus on the price compression between the flat 50 day EMA ($1,333) and the rising 20 day EMA ($1,306).

To expand the key levels to easier to reference price points, we’ll refer to $1,300 (key support) and $1,350 (key resistance).

I included a Zoomed-In chart specifically highlighting the 20/50 EMA compression levels on the left side of the chart.

Simple trade planning for the future derives from these levels:

A bullish breakthrough above $1,350 continues the counter-trend reaction toward the $1,400 target while a pro-trend breakdown under $1,300 triggers a third “Bear Flag” retracement entry with a target toward $1,250 then $1,200.

Going beyond the EMA and price levels, we note the ongoing negative divergence with price during the counter-trend rally toward $1,350 which tips the scales to the downward/bear flag thesis.

The picture is the same in the tradable Gold ETF (symbol GLD):

GLD Daily Chart Technical Analysis Structure Trend EMA Moving Average Price Levels

We can see that the specific daily EMA levels for GLD are $128.90 for the flat 50 day EMA and $126.35 for the rising 20 day EMA.

Price has compressed so far between these levels ahead of a tradable or expected breakout up above $130 (entering “Open Air” toward $137.50) or down beneath $126 (targeting $120 then $115 for the ETF).

We can also see volume diverge or decline relative to the entirety of the July counter-trend rally.

Finally, let’s drop to a price-specific Daily Chart with two Fibonacci Reference Grids:

Gold Daily Price Chart Technical Analysis Fibonacci and Trendlines Planning Levels

In addition to the flat 50 day EMA, we see a short-term 38.2% Fibonacci Retracement (green) into the $1,348 ($1,350) futures contract level.

So far, that price has marked the intraday swing high of the recent counter-trend reaction.  We’ll still need a firm break under $1,300 for a confirming signal.

We’ll be monitoring price movement down away from the $1,350 level and especially beneath the $1,300 level in the event that we do see a breakdown soon.

Otherwise, buyers could again step in to find value above $1,300 and continue this short-term ‘range’ or ping-pong intraday plays between the broader $1,300 and $1,350 levels.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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