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Tuesday, November 4, 2014

Gold and Silver charts: bottoms fall out

Gold Chart Pattern

Gold_Nov0314

The following comments appeared in the previous post on the daily bar chart pattern of gold: “The … upward bounce was sharp – typical of bear market rallies. Gold’s price crossed above its falling 20 day EMA without much ado, but is likely to face strong resistance from the zone between 1240 and 1260.”

Gold’s price climbed into the resistance zone, briefly crossed above the falling 50 day EMA, but topped out after touching an intra-day high of 1255 on Oct 21.

Bears resumed their selling, After a day’s support at 1240, gold’s price dropped below its 20 day EMA and then crashed through the long-term support level of 1180 on huge volumes to touch a low of 1160 – the lowest level in 4 years.

All three technical indicators have entered their respective oversold zones. Note that MACD is showing positive divergence by touching a higher bottom. Any rally is likely to be short-lived, as bears are strictly on a ‘sell on rallies’ mode.

On longer term weekly chart (not shown), gold’s price faced resistance from its falling 20 week EMA and is trading below its three weekly EMAs in a long-term bear market. Technical indicators are looking oversold – which could lead to another rally. The next long-term support is at 1000; that is where gold’s price may find a bottom.

Silver Chart Pattern

Silver_Nov0314

The following comments were made in the previous post on the daily bar chart pattern of silver: “Silver’s price may rally some more, but the zone between 18 and 19 will provide strong resistance.”

Silver’s price managed to cross above its falling 20 day EMA on a couple of occasions, but failed to even test the 18 level. After consolidating sideways for a few days – during which the 17 level provided support – silver’s price fell below 16 on huge volumes.

Daily technical indicators are in their respective oversold zones. Slow stochastic has formed a small ‘rounding bottom’ pattern. MACD and RSI are showing positive divergences by touching higher bottoms. However, any rally will probably face more bear selling.

On longer term weekly chart (not shown), silver’s price is trading well below its three weekly EMAs in a long-term bear market. Technical indicators are in their respective oversold zones, and two of them – MACD, RSI – are showing positive divergences by touching higher bottoms. The next long-term support is at 14.

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