Friday, November 22, 2013

GOLD Weekly Chart Descending Triangle Pattern Sideways Channel

The gold descending triangle pattern was highlighted many times over the last couple years and the failure occurred at 1575 this past Spring. The vertical side of the triangle is 325 handles (1900-1575), thus, a target of 1250 is identified once the failure occurred (1575-325). Bingo, that was achieved. If a 1550 triangle baseline is used, that target is 1200. Bingo, also achieved so the descending triangle pattern has played out and is now satisfied. Gold moves through the sideways brown channel at 1250-1400 ever since May. The June-July bottom was cheesy. Note the descending MACD line that never truly developed positive divergence. The RSI was simply buried in oversold territory and the tiny flat bottom provided the possie d bounce, not exactly a ringing endorsement, but price exploded higher.  Now price drifts lower again to test the 1200-1250 support area.

A W pattern bottom may be in play with the bottom of the second W now forming. The near-term behavior over the last couple months hints at a bounce needed, especially considering the beating the last couple days, but the stochastics and money flow want to see another low. The thin green lines require monitoring moving forward. As price bases at the current levels and drifts towards 1200 for a matching, or even lower low, watch to see if the indicators maintain the thin green lines, which is likely, which will create positive divergence and mark the bottom. An important concept on this chart is that gold never back kissed the triangle base line at 1550-1575 which is an odd occurrence. Price should have shown respect but instead simply collapsed lower. This leaves the back test of 1550-ish on the table.

Gold appears to be basing and setting up for a recovery. The projection is for price to move through the 1250-1400 channel for a few weeks or months so the 1200-1250 area provides a potential long opportunity. The concern is moving into the new year since a deflationary scenario could apply further downside pressure. The gold miners are more attractive than playing the metal currently. The gold bashing continues with GS saying a big drubbing is coming in 2014 and hedge fund manager Paulson, known for his continual gold long position, says he is not planning to add any gold moving forward. Paulson may be a good fade, however, since he was gun-ho bullish at 1900 (the top), and now he is bearish. The rumors of gold's demise are likely greatly exaggerated. Nibbling in for longs in this 1200-1250 area is an attractive idea moving forward although the gold miners would be the preferred trade. Keystone's 80/20 rule says 8's lead to 2's and 2's lead to 8's so the 1220 may want to lead to 1180. A 1280 print would want to lead to 1320. It is important for gold bulls to hold 1200 since that may lead to 800 for the years ahead if it fails. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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