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Tuesday, July 10, 2012

Gold and Silver chart patterns: bears in no mood to give up control

Gold Chart Pattern


For the past two months, gold’s price has been behaving like a yo-yo – jumping up each time it falls below 1540 and sliding down whenever it reaches near its 200 day EMA. Down-day volumes have mostly been stronger than up-day volumes since Mar ‘12 – a clear sign of ‘distribution’ from strong hands to weaker hands.

Two week’s back, readers were cautioned that gold’s daily bar chart is forming a large ‘descending triangle’ reversal pattern. A break down below 1525 can be very bearish, and push gold’s price down below 1200. That may or may not happen because technical analysis is not a science. But forewarned is forearmed.

Technical indicators are looking bearish again. MACD is touching its signal line in negative territory. RSI has slipped below its 50% level after a brief move above it. Slow stochastic has almost fallen to its 50% level.

Gold’s price, its 20 day EMA and 50 day EMA are all trading below the falling 200 day EMA – a clear sign that bears are in control. The correction from the Sep ‘11 top is now 10 months old.

Silver Chart Pattern


Positive divergences in the technical indicators two weeks ago had indicated a possible rally on silver’s daily bar chart pattern. Silver’s price dropped close to the support level of 26 before a brief rally managed to rise past the falling 20 day EMA and the 28 level. Bears used the opportunity to sell.

Silver’s price is trading below all three EMAs and is in a strong bear grip. The only solace for the bulls is that silver is far below its 200 day EMA. Another rally may be around the corner.

Technical indicators are looking bearish. MACD is above its signal line, but in negative territory. RSI and slow stochastic have both dropped below their 50% levels. There is no reason to feel bullish. Any rallies should be used to sell.

Silver’s price chart is forming a large ‘descending triangle’ reversal pattern (not shown) that has very bearish implications if the support level of 26 is breached.

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