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Tuesday, April 7, 2015

Gold and Silver charts: bear market rallies approaching strong resistance zones

Gold Chart Pattern

GOLD_Apr0615

The daily bar chart pattern of gold bounced up strongly from the ‘support zone’ (between 1130 and 1150), and climbed above its 20 day and 50 day EMAs but faced resistance from the 1220 level.

The possibility of an upward bounce – due to oversold technical indicators - was mentioned in the previous post. A likely interest rate hike by the US Fed may have also fuelled some buying.

Note that after dropping below its 20 day and 50 day EMAs in the last week of Mar ‘15, gold’s price rallied to breach the 1220 level intra-day on Apr 6, but dropped to close below it.  In the process, gold’s price may have formed another ‘inverse head and shoulders’ reversal pattern – with the ‘neckline’ at 1220 - from which an upward break out can be expected.

Gold’s price had earlier formed a larger ‘inverse head and shoulders’ pattern (during Sep to Dec ‘14). An upward break out from that pattern had propelled gold’s price above the ‘support-resistance zone’ (between 1240 and 1280) in Jan ‘15. Just when a trend reversal looked imminent, bears struck viciously and pushed gold’s price down below its three EMAs.

Daily technical indicators are in bullish zones. MACD is moving above its signal line and entered positive territory. RSI is rising above its 50% level. Slow stochastic has re-entered its overbought zone. A continuation of the rally is likely to face resistance from the falling 200 day EMA – and stronger resistance from the ‘support-resistance zone’.

On longer term weekly chart (not shown), gold’s price closed just above its 20 week EMA, but is trading below its falling 50 week and 200 week EMAs in a long-term bear market. Technical indicators are in bearish zones, but showing signs of upward momentum.

Silver Chart Pattern

SILVER_Apr0615

The daily bar chart pattern of silver bounced up strongly from the ‘support zone’ (between 15 and 15.50), and climbed above its 20 day and 50 day EMAs but faced resistance from the 17.50 level.

It dropped to seek support from its entangled 20 day and 50 day EMAs, bounced up once more but fell short of the 17.50 level and closed just below 17.

Daily technical indicators are in bullish zones. MACD is rising above its signal line in positive territory. RSI is treading water above its 50% level. Slow stochastic dropped from its overbought zone, but is trying to move up again.

The bear market rally may continue a bit longer, but is expected to face resistance from the falling 200 day EMA and the ‘support-resistance zone’ (between 18 and 19).

On longer term weekly chart (not shown), silver’s price closed above its 20 week EMA, but is trading below its 50 week and 200 week EMAs in a long-term bear market. Technical indicators are in bearish zones, but showing signs of upward momentum.

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