Technical Traders Have The Gold Bull By The Horns

 | Feb 14, 2017 11:50

Originally published by AxiTrader h2 Key Takeaway/h2

Gold has been mapping out some perfect technical patterns over recent months.

Overnight we saw a continuation of this trend with the price of gold in US dollars pulling back to test the break out level from last week.

That sets up a nice chance for a look at the charts and what they suggest for gold going forward.

h2 What You Need To Know/h2

Gold bottomed in late 2016 around $1122. That was just a couple of dollars below the 76.4% retracement level of the 2015/2016 rally. That is, 76.4% in the fibonacci sequence is the ratio of the numerator which proceeds the denominator by three spots in the series. For example 21/89 or 34/144.

Since finding support at this last line of defence gold has rallied in a series of neat technical moves.

  1. The initial pulse to $1219 satisfied the 38.2% retracement of the high of 2016 to low around $1122;
  2. The pullback into the low $1180 region was then a 38.2% retracement of that rally;
  3. Gold subsequently rallied to $1219/20 again, made a high of $1225 before falling to test trendline support;
  4. It then broke $1219/20 running higher with this trendline until it broke, was retested and reject; and
  5. last night gold almost perfectly test it's breakout level at $1219.

It's an amazing example of almost perfect execution of technical parameters and expectations. Although it has yet to satisfy my own expectation of a test into the $1248/57 region - a confluence of the 138.2% projection and a 50% retracement of a larger move.

h2 So what's it mean now?/h2

That is a very interesting question. But it is one which also suggests the $1219/20 region is once again the key area of support. It's also the breakout level - so it's important.