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Tuesday, December 11, 2012

Gold and Silver charts: bullish cup-and-handle patterns

Gold Chart Pattern

Gold_Dec1012

The 1 year weekly bar chart pattern of gold shows the formation of a bullish cup-and-handle pattern. The ‘cup’ portion has been completed. The ‘handle’ formation is ongoing. In a post 2 weeks ago, investors were advised to hold with a stop-loss at the level of the 20 week EMA.

Note that last week’s price bar had dropped below the 20 week EMA on intra-week basis, but closed exactly on the 20 week EMA by the end of the week. Technically, the stop-loss didn’t get triggered. The bullish bias in the chart continues.

Weekly technical indicators are beginning to look a bit bearish. MACD has crossed below its signal line in positive territory. RSI is barely above its 50% level. Slow stochastic has dropped below its 50% level. If gold’s price falls below 1660 - which will negate the cup-and-handle pattern - bears will get the upper hand.

However, all three indicators are showing positive divergences by touching higher tops in Sep/Oct ‘12 while gold’s price tested its Feb ‘12 top of 1800 in Oct ‘12. That keeps the door open for a move above the 1800 level (‘rim’ of the cup).

Silver Chart Pattern

Silver_Dec1012

Like gold’s chart, silver’s 1 year weekly bar chart pattern has also been forming a bullish cup-and-handle pattern. The ‘handle’ portion is being formed. A move above 36 will be quite bullish. A drop below 31 will negate the cup-and-handle pattern.

Weekly technical indicators are bullish, but showing some signs of weakness. MACD is above its signal line, but moving sideways in positive territory. RSI is also moving sideways above its 50% level. Slow stochastic is above its 50% level, but sliding down.

All three indicators touched higher tops in Sep/Oct ‘12 while silver’s price touched a top lower than its Feb ‘12 top. The combined positive divergences means a likely up move above the 36 level.

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