Tuesday, August 15, 2017

Gold and Silver charts: bull rallies hit the pause button

Gold chart pattern

The following remarks appeared in the previous post on the daily bar chart pattern of Gold: "The pullback rally is probably on its last legs. Profit booking can begin at any time."

Gold's price rose to 1280.30 on Tue. Aug 1. Profit booking started from the next day. Gold's price dropped to its rising 20 day EMA on Tue. Aug 8.

The falling US Dollar index and nuclear war rhetoric from North Korea gave a boost to gold bulls. Gold's price bounced up to touch a slightly lower top of 1298.10 on Fri. Aug 11 - testing but failing to overcome the strong resistance level of 1300.

Daily technical indicators are in bullish zones, but looking overbought. RSI and Slow stochastic are showing negative divergences by failing to rise higher with gold's price.

The US Dollar index has subsequently risen to its highest level since Jul 27. Bears have taken the opportunity to sell. At the time of writing this post, gold futures are trading lower around 1281.

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.

Any fall below the Jul 10 low of 1204 will be very bearish because it will turn the Apr, Jun and Aug '17 tops into a 'triple top' reversal pattern. So, the battle lines between bulls and bears are clearly drawn.

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, but their upward momentum is reducing.

Silver chart pattern

The daily bar chart pattern of Silver appears to have formed a bullish 'inverse head and shoulders' pattern with a 'neckline' at 16.90.

Note that silver's price broke out above the 'neckline' and its 200 day EMA with good volume support - which technically validates the breakout .

However, silver's price has failed to rise higher after touching a high of 17.24 on Thu. Aug 10. Daily technical indicators are looking bullish, but Slow stochastic is showing negative divergence by touching a lower top while silver's price rose higher.

Bears are using the opportunity to sell. At the time of writing this post, silver futures are trading lower at 16.85 - below its 200 day EMA, and testing support from the 'neckline' at 16.90.

A deeper fall below its 20 day and 50 day EMAs will negate the 'inverse head and shoulders' pattern - giving back control of the chart to bears. Bulls may defend the 16.90 level to try and prevent a deeper fall.

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 in neutral zone. Slow stochastic is rising towards its overbought zone and showing upward momentum.

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