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Tuesday, September 17, 2013

Gold and Silver charts: an update

Gold Chart Pattern

Gold_Sep1613

In an analysis of the 6 months daily bar chart pattern of gold two weeks back, it was explained why the 1425 level was an important technical resistance level. The following cautionary remark was also made: “If gold’s price falls below its 50 day EMA (currently at 1350), it can fall to much lower levels…”.

After receiving temporary support from its 50 day EMA, gold’s price dropped sharply lower to the 1300 level last week. The 2 months long bear market rally appears over. A pullback towards the 50 day EMA is a possibility, though there are no such signs from the daily technical indicators as yet.

MACD has dropped into negative territory below its signal line. Note the bearish rounding-top pattern formed by the signal line. RSI has fallen below its 50% level. Slow stochastic is inside its oversold zone. Bears are back in control; gold’s price should seek lower levels.

On longer-term weekly chart (not shown), the 50 week EMA is hurtling down towards the 200 week EMA. A drop below the long-term moving average will technically confirm a long-term bear market.

Silver Chart Pattern

Silver_Sep1613

The 6 months daily bar chart pattern of silver shows the sharp bear market rally during Aug ‘13 that received strong resistance from its 200 day EMA and reversed direction. Such rallies provide exit opportunities to investors who may have been stuck at higher levels. Silver’s price is trading below all three EMAs. Bears are back in control.

Daily technical indicators are looking bearish. MACD is still positive, but is falling towards negative territory. Note the bearish rounding-top pattern formed by the signal line (in red). RSI has fallen below its 50% level after forming a ‘double top’ reversal pattern inside its overbought zone. Slow stochastic also formed a ‘double top’ reversal pattern and has dropped inside its oversold zone.

On longer-term weekly chart (not shown), silver’s price is trading below all three weekly EMAs. A test and possible breach of the Jun ‘13 low appears likely.

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