Tuesday, June 17, 2014

Gold and Silver charts: an update

Gold Chart Pattern

Gold_Jun1614

The following remarks in the previous post on gold’s daily bar chart pattern are worth repeating: “Looks like gold’s price is trying to find a bottom at 1240, from where it may attempt a pullback towards the 1260-1280 zone. If the zone now turns into a resistance zone, which it should, then the pullback may be short-lived.”

Note that gold’s price bounced up from the 1240 level, as expected, and entered the zone between 1260-1280. Yesterday, it briefly breached the 1280 level and the 50 day EMA intra-day, but formed a ‘reversal day’ pattern (higher high, lower close) and dropped back inside the 1260-1280 zone.

Has the rally ended? It would seem so. The turmoil in Iraq had been a trigger for the rise in the prices of oil and gold. As the progress of the Sunni rebels towards Iraq’s main oil fields down south has stalled, bullish speculative positions are likely to get squared off.

Technically, the indicators are giving mixed signals. MACD has crossed above its signal line in negative zone, but its upward momentum is slowing down. RSI is resting at its 50% level after briefly moving above it. Slow stochastic has risen sharply above its 50% level into bullish zone.

After touching a high of 1395 in Mar ‘14 and forming a ‘reversal day’ pattern, gold’s price has been in a down trend (lower tops and lower bottoms), and has been trading below its falling 200 day EMA for the past three months.

On longer term weekly chart (not shown), gold’s price faced resistance from its 20 week EMA and is trading below all three weekly EMAs in a bear market.

Silver Chart Pattern

Silver_Jun1614

Two weeks ago, silver’s price had closed at 18.75, from where an upward bounce was expected. Why? Because it had twice provided support at the same level earlier – indicating that bulls were likely to defend the level.

The expected bounce turned into a sharp bear market rally on strong volumes that propelled silver’s price above its 20 day and 50 day EMAs. However, the rally appears to have stalled short of its May ‘14 top of 20.

Daily technical indicators are looking bullish. MACD has risen sharply above its signal line, and is about to enter positive territory. Slow stochastic had a steep climb to enter its overbought zone. RSI is above its 50% level, but beginning to turn down.

The price band between 20-20.50 is a resistance zone. Bears are likely to become active should silver’s price attempt to move up higher.

On longer term weekly chart (not shown), silver’s price faced resistance from its 20 week EMA and is trading below all three weekly EMAs in a bear market.

Subhankar blogs at investmentsfordummieslikeme.blogspot.com

You can contact him at mobugobu@yahoo.com, and follow him at twitter @mobugobu

2 comments:

Karthikraja K said...

How there is a coincidence between technical and Fundamental? How chart knows that there is a Iraq turmoil will help for small rally? Pl provide some more interesting things on this kind of coincidence....

Subhankar said...

Such funny coincidences of technicals leading fundamentals happen so often that it isn't funny any more!

You will find that a stock's price suddenly jumps up (or crashes) immediately after announcement of good (or bad) results. But the rally (or correction) in the stock's price starts well before the news hits the market.

Doesn't happen always - but often enough. The idea is to be aware that such things happen. By learning basic technical signals, one can benefit from such 'coincidences'.