Once we broke support a few months ago in the metals market, I began pointing to much lower levels b...
Gold Forming Bullish Pennant Consolidation
01/20/2010 12:01 am EST
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(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; chart patterns in white; 50-period simple moving average in light blue.)
Price action on spot gold, a daily chart of which is shown, has formed a potentially bullish pennant consolidation pattern within the context of its rebound off the December lows. This rebound is represented by a short-term uptrend support line extending from the December 22 support low around 1074.
This all occurs within the context of an overall continuing uptrend. Any significant breakout above the pennant consolidation could signify a potential recovery in gold and an uptrend continuation that could ultimately target further resistance around the 1225 all-time high.
Any significant breakdown below both the noted short-term uptrend support line and the pennant pattern could target downside support in the noted 1070-74 support/resistance price region. Any substantial breakdown below that support level could place the current long-term uptrend in jeopardy.
By James Chen, chief technical strategist, FXSolutions.com
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