Gold price action and chart patterns still paint bearish technical picture
Despite my personal belief that Gold in merely retracing after a steep rally since 2002, it is hard to convince myself that it has turned a corner. This is what I said previously:
Big technical picture of gold is looking potentially flag like i.e. continuation of previous uptrend. Short term wise however the downward momentum (blue dotted line) is not over till is over. And former support (purple) will likely become resistance.
Technical analysis of Gold (XAUUSD) daily chart from November 2012 till date
I use a number of methods that I believe is the closest to price action. Specifically I look out for:
- Monthly highest and lowest traded price
- Chart patterns that have high probability outcomes.
Fact #1 – lower highs each month
Pink boxes show traded price of gold in each month. Each box is 1 month in duration and the highs and lows show the highest and lowest traded price of the month. Gold started making lower monthly traded lows since November 2012 with the exception of March and May this year. But more importantly, it has not made any higher months AT ALL during this whole duration. The trend is clearly down and there is little clue that this down trend momentum is changing or will change.
Fact #2 – no bullish reversal chart pattern
Chart patterns most associated with bullish reversals like the double bottom and triple bottom are simply not visible. High probability patterns should jump out visually so if we cannot see clearly, it is a poor pattern or it is not there. On the other hand there is one pattern I can see clearly and it is bearish flag/pennant continuation pattern. At the moment the pattern is not confirmed. It will be when price breaks the supporting trend lines below.
Where will price go if it continues down?
That is anybody guess but a simple method says around $1180. But it could slide along anywhere and rebound from the equidistant channel in the topmost chart. Watch this video “What is the best way to draw equidistant channel in MT4”
What kinds of technical signal should we expect for a bullish set up?
- If price were to break May high, this will buck the trend we saw in the last few months.
- A double bottom W or triple bottom VVV should be very positive too but they must break what we call the neckline.
Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.
“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.