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Tuesday, August 20, 2013

Gold and Silver charts: an update

Gold Chart Pattern

$GOLD - Aug2013-001-001

The rally on the 6 months daily bar chart pattern of gold has formed a bearish ‘rising wedge’ pattern. After crossing above the 1375 level for the second day in a row, gold formed a ‘reversal day’ pattern (higher high, lower close).

A correction towards the lower edge of the wedge (at 1300), and a possible break below it is likely. Bear market rallies are opportunities to sell – but do maintain a stop-loss at the upper edge of the wedge (at about 1385), in case the bulls turn aggressive buyers. Weak volumes on up-days is an indication of waning confidence of bulls.

Daily technical indicators have turned bullish, but showing signs of weakening upward momentum. MACD is rising above its signal line in positive territory. RSI has turned down after failing to reach its overbought zone. Slow stochastic is inside its overbought zone, but beginning to turn down.

On the longer-term weekly bar chart (not shown), gold’s price is trading below its 200 week EMA (at 1425), and facing resistance from its 20 week EMA. Though the 50 week EMA has not crossed below the 200 week EMA yet, a long-term bear market is looming.

Silver Chart Pattern

Silver_Aug2013

The 6 months daily bar chart pattern of silver shows a sudden and sharp rally on strong volumes that crossed above the 23 level, but formed a ‘reversal day’ pattern (higher high, lower close) that usually marks the end of an intermediate rally.

Daily technical indicators are looking overbought. MACD is climbing rapidly above its signal line in positive territory. RSI and Slow stochastic have entered their respective overbought zones, but showing signs of turning down.

Bear market rallies provide opportunities to sell. On the long-term weekly bar chart (not shown), silver’s price has moved above its 20 week EMA, but the 50 week EMA has crossed below its 200 week EMA – the ‘death cross’ confirming a long-term bear market.

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