Gold prices appear to be forming a type of symmetrical triangle consolidation as seen in both the daily and weekly time frames as of July 26, 2009. Let’s take a look and note critical support and resistance levels.
All eyes of course are focused on the $1,000 per ounce level, as a breakout there would most likely lead to a large price run-up in gold. However, we’re not quite there yet.
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The key levels to watch on a “wider” basis are the $1,000 level (critical resistance) and the $850 level, which also reflects Fibonacci support (not shown). A breakdown from $850 would lead to an almost certain retest of $700, but again, we’re not there yet.
For now, a symmetrical triangle consolidation pattern is forming, which currently compresses price between $910 and $960. The triangle is nearing completion, and perhaps the best play would be a clean break above the upper line to target a “magnet trade” to $1,000, or beneath the lower line also to target a magnet trade down to $850.
Until then, we are getting little guidance from the 20- or 50-day EMAs (in a consolidation phase, moving averages are virtually useless as support and resistance), so we focus on price highs and lows for clues.
By Corey Rosenbloom of AfraidToTrade.com
