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Tuesday, May 29, 2012

Gold and Silver chart pattern: an update

Gold Chart Pattern

Gold_May2512

Two week’s back, the following comments were made about gold’s chart pattern: “Gold’s price is trading well below its falling 20 day EMA, which could lead to a technical bounce at any time. Such a bounce will be an exit opportunity for those who may still be holding on. A test of the Dec ‘11 low of 1520 is on the cards.”

Gold’s price dropped down to test the Dec ‘11 low and bounced up to the 1600 level, but faced strong resistance from the falling 20 day EMA. The price dropped again to touch a slightly higher bottom. Bulls need not feel too encouraged – the volumes continue to be higher on down days, which is a sign of distribution.

Technical indicators have corrected oversold conditions, but remain bearish. Any up moves will face resistance from the falling 20 day and 50 day EMAs. The ‘death cross’ of the 50 day EMA below the 200 day EMA has technically confirmed a bear market. If gold’s price falls below 1520, the next stop down the trail of broken dreams will be 1475.

Silver Chart Pattern

Silver_May2512

Oversold conditions in the technical indicators caused an upward bounce before silver’s price could test the Dec ‘11 low of 26. The up move halted at 29. Silver’s price appears to be consolidating within a symmetrical triangle, which is usually a continuation pattern. That means a drop below the triangle after the consolidation is over.

The technical indicators have corrected oversold conditions, but remain bearish. In case silver’s price climbs above the falling 20 day EMA, it will face resistance from the 50 day EMA. Lower volumes on up days does not augur well for the bulls.

All three EMAs are falling and silver is trading below them. A bear market is in progress. If 25 gets breached, silver can fall to 20.

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