Technicals | Nov 25 2016
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Bottom Line 24/11/16
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 1183 / 1121 / 1058
Resistance Levels: 1233 / 1338 / 1385 / 1412
Technical Discussion
Gold on Wednesday night dropped below 1200 per oz for the first time since February. It has essentially become heavily weighed since the Trump victory and reconfirmation of his inflationary type policies which have put a rocket under the Greenback. For the most part Gold and the U.S Dollar trade inversely to each other, so it does appear as though Gold's substantial weakness of late is attributed almost entirely to a stronger dollar. Some upbeat reporting in the States last night saw Core durable goods beating forecasts although employment claims disappointed at 251,000 with the expected reading being more towards 241,000. Technically the metal is now on a knifes edge, so lets take a closer look.
Reasons to be cautious:
→ price chart starting to look damaged
→ 61.8% retracement zone now under threat
→ drop below 1200 backing seller strength
Our longer term bullish rhetoric on Gold, and precious metals in general, has now come under extreme pressure. Ever since the Wave-B high (see chart) was locked into place on election day, it's simply been all down hill. Big wide ranging key outside reversal days like this nearly always have follow through and price has yet again not failed to disappoint. Volume since the 9th November has also been strong with November likely to lock in one the biggest contract turnover months for Gold seen in many years.
The problem though is that it has been full of sellers, and price is now sitting right on a ledge. The 50.0% retracement zone has been achieved at 1221, the 61.8% at 1182 and Wave-A vs Wave-C equality sits right in between at 1192. Last night price tagged 1181 before closing at 1189. Simply put, if our longer term bullish analysis is to continue to remain valid, buyers now need to return and pretty much immediately. Another negative session that closes on its lows on high volume sets the scene for the major support zone circa 1050 – 1100 to be retested, which means all the hard work price action has undertaken since the beginning of the year, will have all been for nothing.
With any recovery from back down at major support likely to be long and arduous. Best case scenario from there would be a potential double bottom locking in which could have bullish outcomes over the coming years if triggered, with the worst case scenario being gold dropping below major support which would mean there will be no more glitter coming from Gold for many years to come. Clearly its make or break time right here.
Trading Strategy
Shorting Gold post the aforementioned key outside reversal day would have been the ideal strategy for nimble traders. Yet if price can now start to find some support, then low risk opportunities on the long side will continue to be considered. Yet as mentioned in our technical review tonight, any move from here that sticks below 1180 means all bets are off. We are not in the business of catching falling knives and this is what price action will be labelled if it keeps capitulating from here. Stand aside for now.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).
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