Tuesday, August 29, 2017

Gold and Silver charts: bulls win tough battles; will they win the war?

Gold chart pattern

The following remarks appeared in the previous post on the daily bar chart pattern of Gold: "The resistance level of 1300 has been tested twice. A resistance (or support) level gets weakened by each subsequent test. Expect bears to defend the 1300 level strongly."

Gold's price dropped to its rising 20 day EMA, only to bounce up and breach the 1300 level on Fri. Aug 18 by touching an intra-day high of 1306.90, but profit booking led to a close at 1291.60.

During the following week (Aug 21-25), bulls tried their best to breach the 1300 level, but bears defended strongly. Gold's price again dropped to seek support from its rising 20 day EMA on Fri. Aug 25, but closed just below the 1300 level.

The 1300 level got 'weakened' by the frequent tests of resistance. Bulls just needed a trigger to extend the rally from the Jul '17 low. 

North Korea fired a missile that flew over Japan on Mon. Aug 28. The US Dollar index fell sharply. Gold's price easily broke out above the 1300 level, and is trading well above its three rising daily EMAs in a bull market.

Expect bulls to press home their near-term advantage and propel gold's price to the 1330-1340 zone. Note that daily technical indicators are looking overbought and showing negative divergences by failing to touch new highs with gold's price.

A pullback towards 1300 can occur at any time. That will be a buying opportunity for those who missed buying on Monday's breakout.

On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are in bullish zones and showing upward momentum. Slow stochastic is well inside its overbought zone and can induce profit booking.

Silver chart pattern

The daily bar chart pattern of Silver shows a fierce battle near the 200 day EMA. Bears did their level best to defend the long-term moving average to prevent the rally from the Jul '17 low from extending any further.

Bulls defended the 16.90 level (the 'neckline' of an 'inverse head and shoulders' pattern) with equal fervour. (Please refer the previous post .) Bulls eventually won the battle as silver's price broke out above the 200 day EMA on Mon. Aug 28. 

Daily technical indicators are in bullish zones but looking a bit overbought. Note that RSI and Slow stochastic are showing negative divergences by failing to rise to new highs with silver's price.

Any further rally towards 17.75-18 may invite bear selling and a pullback towards the 200 day EMA.

On longer term weekly chart (not shown), silver’s price closed above its 20 week and 50 week EMAs, but below its 200 week EMA in a long-term bear marketWeekly MACD has crossed above its signal line in bearish zone. RSI is rising above its 50% level. Slow stochastic has entered its overbought zone and can trigger a pullback towards the 50 week EMA.

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