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Tuesday, October 14, 2014

Gold and Silver charts: bear market rallies

Gold Chart Pattern

Gold_Oct1314

After breaching the support level of 1240, the daily bar chart pattern of gold was expected to fall to its previous low of 1180. The good news for gold bulls is that the 1180 level was tested but not breached.

The subsequent upward bounce was sharp – typical of bear market rallies. Gold’s price crossed above its falling 20 day EMA without much ado, but is likely to face strong resistance from the zone between 1240 and 1260. The falling 50 day EMA is within the resistance zone.

Daily technical indicators have corrected oversold conditions and looking bullish. MACD is emerging from its oversold zone, and its signal line has formed a bullish ‘rounding bottom’ pattern. RSI has crossed above its 50% level for the first time in two months. Slow stochastic has risen sharply to enter its overbought zone.

On longer term weekly chart (not shown), gold’s price is trading well below its three weekly EMAs in a long-term bear market. Technical indicators are showing some upward momentum, but remain in bearish zones. Expect bears to attack soon.

Silver Chart Pattern

Silver_Oct1314 

In the previous post on the daily bar chart pattern of silver, bears appeared to have a stranglehold on the chart. A lower target of 16 was mentioned.

Silver’s price dropped to a new 52 week low of 16.50. All three technical indicators were inside their respective oversold zones, but two of them – RSI, Slow stochastic – showed positive divergences by failing to touch new lows.

A rally ensued and took silver’s price above the 17.50 level - where it faced strong resistance from the falling 20 day EMA. Technical indicators are beginning to look bullish. Silver’s price may rally some more, but the zone between 18 and 19 will provide strong resistance. The falling 50 day EMA is within the resistance zone.

On longer term weekly chart (not shown), silver’s price is trading well below its three weekly EMAs in a long-term bear market. Technical indicators are bearish, but two of them – MACD, RSI – are showing positive divergences by touching higher bottoms.

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