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Tuesday, February 5, 2013

Gold and Silver charts: in down trends

Gold Chart Pattern

Gold_Feb0513

After testing the 1800 level back in Oct ‘12, the 6 months daily bar chart pattern of gold has been falling within a downward channel – forming a bearish pattern of lower tops and lower bottoms.

The price of the yellow metal has closed below its 200 day EMA for 8 straight trading days, with down-day volumes regularly exceeding up-day volumes. That is an ominous sign of distribution – which means lower levels are likely.

Daily technical indicators are looking bearish. MACD is entangled with its signal line in negative territory. RSI is trying to cross above its 50% level. Slow stochastic – which is showing a negative divergence by touching a lower bottom while gold’s price touched a higher bottom on Jan 28 - is below its 50% level and turning down.

The 50 day EMA is still above the 200 day EMA. If it crosses below the long-term moving average (‘death cross’), it would technically confirm a return to bear territory.

On longer-term weekly bar chart (not shown), gold’s price is consolidating within a rectangular band between 1525 and 1800 - well above its rising 200 week EMA, keeping the long-term bull market intact.

Silver Chart Pattern

Silver_Feb0513

Silver’s 6 months daily bar chart pattern is in a clear down trend – touching lower tops and lower bottoms – since Oct ‘12. In a post 2 weeks back, the following comment was made: “Falling volumes indicate that the rally may be on its last legs.”

Silver’s price touched an intra-day high of 32.50 on Jan 23 ‘13 and has been consolidating within a small symmetrical triangle. All three EMAs are converging, which is often followed by a sharp move. The move can be in either direction. A convincing up move – i.e. supported by increase in volumes – above the 33.50 level may change the down trend.

Daily technical indicators are mildly bullish, but showing signs of weakness. MACD is slightly above its signal line, and barely positive. RSI is above its 50% level, but moving sideways. Slow stochastic is also above its 50% level, but moving down.

On longer-term weekly bar chart (not shown), silver’s price is trading above its rising 200 week EMA – which is a bullish sign.

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