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Tuesday, November 27, 2012

Gold and Silver charts: an update

Gold Chart Pattern

Gold_Nov2612

In the previous post on gold’s 2 years weekly bar chart pattern, the formation of the ‘handle’ of a bullish cup-and-handle continuation pattern was technically confirmed, when gold’s price rose above its 20 week EMA backed by a volume spurt.

After a pullback down to the rising 20 week EMA the following week, gold’s price resumed its up move in a truncated trading week due to the Thanksgiving holiday. So, lower volumes last week is not a matter of concern.

Weekly technical indicators remain bullish. MACD is moving sideways and has merged with its signal line in positive territory. RSI and slow stochastic are also moving sideways above their 50% levels.

Hold, with a stop-loss at the level of the 20 week EMA. Add more on a convincing break out above the 1800 level. After consolidating for more than a year, gold’s long-term bull market looks ready to scale new heights.

Silver Chart Pattern

Silver_Nov2612

Silver’s 2 years weekly bar chart pattern seems to be moving in lock-step with gold’s chart – completing the formation of the ‘handle’ of a bullish cup-and-handle pattern and resuming its up move after a pullback down to the rising 20 week EMA.

Weekly technical indicators are looking slightly more bullish. MACD has started moving above its signal line in positive territory. RSI is moving sideways above its 50% level. Slow stochastic is also above its 50% level, and inching up towards its overbought zone.

Hold, with a stop-loss at the level of the 20 week EMA. Add on a convincing break out above 36. Silver is back in a long-term bull market after a prolonged correction.

4 comments:

scorpio said...

If we look at any ETF, gold in Rupee terms is currently looking like a cup. If it moves higher from the current levels, it would mean closer to all time high for gold. How do you trade in this situation ?

Subhankar said...

Haven't looked at Rupee charts of gold ETFs (what is a good source?)- so can't comment on the 'cup' formation.

In general, a 'cup' or 'saucer' pattern is bullish with an expected upside break out above the 'rim' of the cup/saucer. Upside break outs need to be accompanied by volume spurts for break outs to be technically valid.

The way to trade such patterns is to buy on the upswing with a tight stop-loss, and add more on the break out with a stop-loss at the 'rim' level.

scorpio said...

I am using metastock, but we can look at the ETF on moneycontrol.

http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/goldmansachsgoldexchangetradedscheme/GBE

Do you buy ETF or you buy direct gold.

Subhankar said...

Thanks for the link, Ashish.

The Goldman gold ETF appears to be forming a cup-and-handle continuation pattern. The 'handle' is tantalisingly poised (at about 50% of the depth of the cup). A further fall may negate the pattern.

Buying gold is the prerogative of the ladies in the family. My preference has always been for stocks.