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Tuesday, August 19, 2014

Gold and Silver charts: an update

Gold Chart Pattern

$GOLD-001-001

The following were the concluding comments in the previous post on gold’s bar chart pattern: “… the price pattern formed since the intra-day high of 1345 on Jul 10 ‘14 is a ‘falling wedge’ from which an upward break out is likely.”

On Wed. Aug 6, gold’s price broke out upwards from the ‘falling wedge’ pattern. Any upward break out from a consolidation pattern should be accompanied by significantly higher volumes to validate the break out.

Note that volume was strong but not significantly higher. That put a question mark on the sustainability of the rally following the break out. Sure enough, the rally stalled after gold’s price crossed above its 200 day EMA – in spite of a couple of intra-day forays above the 1320 level.

Bears took the opportunity to reassert control. Gold’s price dropped below all three EMAs on a volume surge on Fri. Aug 15. Daily technical indicators are turning bearish. MACD is about to cross below its signal line into negative territory. RSI has slipped below its 50% level. Slow stochastic is falling towards its 50% level.

On longer term weekly chart (not shown), gold’s price is trading below all three weekly EMAs in a long-term bear market. Weekly technical indicators are giving mixed signals. MACD is barely positive and has merged with its signal line. RSI has just slipped below its 50% level. Slow stochastic is moving sideways above its 50% level. Some consolidation is possible before the down move resumes.

Silver Chart Pattern

Silver_Aug1814

Since touching an intra-day high of 21.65 on Jul 10 ‘14, the daily bar chart pattern of silver has been in an uninterrupted down trend that touched an intra-day low of 19.45 on Mon. Aug 18.

Expectations of an upward break out from a ‘falling wedge’ pattern were belied. Technical analysis is not a science. Patterns don’t always play out as expected. That is why buy/sell action should be initiated only after a convincing break out or break down occurs from a consolidation pattern.

The 20 day EMA has crossed below the 50 day EMA, and all three EMAs are falling. Silver’s price is trading below its three EMAs in a bear market. Daily technical indicators are bearish. MACD is falling below its signal line in negative territory. RSI is just above its oversold zone. Slow stochastic is inside its oversold zone.

On longer term weekly chart (not shown), silver’s price is trading below all three EMAs in a long-term bear market. Weekly technical indicators are in bearish zones. Bears appear to be in total control.

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