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Tuesday, August 18, 2015

Gold and Silver charts: an update

Gold chart pattern

GOLD_Aug1715

The daily bar chart pattern of gold broke out upwards from a ‘falling wedge’ pattern. Strong volume support technically validated the upward break out. After crossing above its 20 day EMA, the rally stalled near the 1125 level.

On Thu. Aug 13 ‘15, gold’s price formed a ‘reversal day’ pattern (higher high, lower close) and dropped below the 1120 level. The 50 day and 200 day EMAs are falling, and gold’s price is trading below them in a bear market.

What caused the sudden price spurt? Unexpected devaluation of the Chinese Yuan sent global stock markets on a tail-spin. At such times, investors tend to seek refuge in precious metals. Technically, oversold conditions and the ‘falling wedge’ gave early indications of an upward break out.

Daily technical indicators recovered strongly from oversold conditions, but their upward momentum has weakened. MACD is rising above its signal line, but remains negative. RSI is at its 50% level in neutral zone. Slow stochastic has dropped down from its overbought zone.

Expect bears to start selling again.

On longer term weekly chart (not shown), all three weekly EMAs are falling and gold’s price is trading well below them in a long-term bear market. Weekly technical indicators have corrected oversold conditions, but remain in bearish zones.

Silver chart pattern

SILVER_Aug1715

The daily bar chart pattern of silver formed a small ‘double bottom’ reversal pattern at 14.30 and bounced up sharply with good volume support. After easily crossing above its 20 day and 50 day EMAs, the rally stalled near the 15.60 level.

Silver’s price has slipped down below its 50 day EMA and is trading well below its falling 200 day EMA in a bear market. Every rally has presented opportunities to sell for bears.

Two of the daily technical indicators – RSI, Slow stochastic - are in bullish zones, but their upward momentum is waning. MACD is rising above its signal line, and reached its ‘0’ line. RSI is above its 50% level. Slow stochastic has dropped down from its overbought zone.

On longer term weekly chart (not shown), silver’s price faced resistance from its falling 20 week EMA, and is trading below its three weekly EMAs in a long-term bear market. Technical indicators are in bearish zones.

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