The two sides of the Gold coin

 

Whether you are a bull or a bear I can create a good story for you

[Note: I do not have a position in the precious metals -- I could just as likely be long as short in my next Gold trade. I am attempting to present a balanced technical analysis of the Gold charts, not biased by a position.]

I have observed one thing about Gold during the past 35 years — Gold nearly always rings a bell before making a big move. Time and time again I have been too quick fingered and chopped up in Gold by reading too much into the chart and by not patiently allowing the chart to fully mature.

Patience is the name of the game when trading Gold. The Gold market is perhaps the most reliable market of all in forming a significant and recognizable chart pattern before each major price thrust. Waiting for a fully mature pattern is a waiting game.  

There is one other thing about major chart developments in Gold — Gold sets itself up technically to go in either direction when it is time for a big move. And we find the Gold market precisely in this position at the present time. Thus, I will create both the bull and bear chart interpretations for Gold.

Bull

The bull market is very much intact, as shown on the quarterly chart. On a quarterly basis the market has made higher highs for 13 consecutive quarters. This string remains intact.

Two things are worthy of note on the daily graph. First, the chart displays a possible continuation “W” pattern, requiring a decisive close above the Nov high. Second, the rally from the late Dec low has been steady with a couple of major bursts. This price behavior is characteristic of the dominant trend. The $44 rally on Jan 25 penetrated the trendine from the Sept high. Bursts through important chart points must be considered as important.

 

The decline starting last Friday is likely just a retracement of the advance from the Dec low. A decline back toward 1688 would be a buying opportunity. The target of the “W” bottom, once completed, would be $2,085. This target is consistent with the advance suggested by the Gold chart priced in Swiss Francs. A completion of the 4+ month triangle on this chart would establish a target of CHF1860.

 

Bear

There is no question but that the symmetrical triangle in Gold/CHF is exactly the type of pattern that will lead to a sizable move. But, this triangle could just as easily be a 5-point top as it could be a 4-point continuation pattern. A decisive close below the Oct low would confirm a top and establish an initial target of CHF1250. See chart above.

More importantly, rather than forming a continuation “W” pattern, the daily chart could just as likely be forming a massive descending triangle, as shown on the weekly chart below. Note that last week’s bar was a reversal. The objective of this descending triangle would be $1,150, pending a decisive close below $1,490.

 

Ont thing is for sure, in my mind. Gold does not make huge moves without the suppporting evidence from a mature chart structure. For the first time since the Sept top we have mature chart structures that would support a $400-plus move.

Markets: $GLD, $GC_F

 

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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