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Tuesday, March 14, 2017

Gold and Silver charts: bulls retreat after facing strong bear attacks

Gold chart pattern

In the previous post on the daily bar chart pattern of Gold, technical indicators were looking overbought and showing negative divergences. The combination usually triggers a correction or consolidation.

A sharp correction ensued. Gold's price dropped 70 points (to 1195) in the space of 9 trading sessions - wiping out all the gains made during Feb '17. Is the bull rally over?

It certainly appears so. All three daily technical indicators have fallen inside bearish zones. Slow stochastic is trying to recover from its oversold zone, and may initiate an upward bounce.

Note that the rally from the Dec '16 low (of 1125) to the Feb '17 top (of 1265) covered 140 points. By falling 70 points, gold's price shows an exact 50% retracement of its recent gains. 

That happens to be a Fibonacci retracement level that often demarcates a battle line between bulls and bears. In other words, a fall below 1195 will hand the advantage back to bears.

Gold's price is trading below its three EMAs in bear territory. If bulls manage to prop gold's price above 1200, they may be able to regroup and mount another rally.

An impending interest rate hike by the US Fed, which is expected to boost the US Dollar index, can put a spanner in the works.

On longer term weekly chart (not shown), gold’s price formed a 'reversal bar' (higher high, lower close) and has closed below its three weekly EMAs in a long-term bear market. Weekly technical indicators are looking bearish, and showing downward momentum.

Silver chart pattern

The daily bar chart pattern of Silver attempted to cross above the 18.50 level on four consecutive trading sessions but failed.  All four daily technical indicators were inside their overbought zones.

That was just the opportunity that bears needed. Silver's price dropped sharply below 17 before recovering a bit. 

Silver's price is trading below its three EMAs in bear territory. The 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a return to a bear market.

Daily technical indicators are in bearish zones. Slow stochastic is well inside its oversold zone, and may trigger an upward bounce. Expect bears to use the opportunity to sell again.

On longer term weekly chart (not shown), silver’s price faced resistance from its 200 week EMA, and dropped to close below its three weekly EMAs in a long-term bear market. Weekly technical indicators are looking bearish and showing downward momentum.

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