Friday, January 21, 2011

Gold Chart - Below Middle Bollinger Band and Key Levels

Gold has recently traded below Key Resistance and Key Support Levels Suggesting a possible trend change. Make no bones about it Gold is and has been in a very strong uptrend and shorting is for the daring. Never-the-less I'm sticking with my bearish outlook but I'm not calling for a complete trend change at least at this point as a confirmed downtrend is not in place - not yet.

The fundamental picture is still strong with a weak dollar. The dollar's fundamentals are still weak with massive deficits, a near zero interest rate, a lack of an exit plan to low interest rates and quantitative easing measures.

Never-the-less the technical analysis for gold is that selling has picked up after hitting key resistance levels. Looking at a weekly chart I see several area's of confluence which builds a bearish case for gold technically.

1. Key Weekly Resistance 1416.68 rejected.
2. Key Monthly Resistance 1420.94 also rejected.
3. Strong Selling Occurring through Key Weekly Support 1358.52.
4. Gold Closing below Key Weekly Support 1358.52 Weekly time-frame.
5. Gold Closing below Middle Bollinger Band on Weekly chart.
6. Bollinger Bands have stopped widening indicating the that last up-thrust has stopped and would take a new one to continue uptrend. This is a good indication of at least a retracement.

The important factor to watch now are the volume patterns to see if buying volume or selling volume is to dominate after the rejected resistance and test of the middle bollinger band. If the trend is to continue to the lower bollinger band it will be interesting if it consolidates or bands begin to widen which would indicate a more severe correction and possible downtrend. Fundamentally the uptrend is still supported on the most part so if new fundamentals come in that are dollar bullish this would support the technical change but if that doesn't happen it should be treated as a pull back unless the selling volume continues to dominate the buying volume - in which case you can ignore any news developments if you want to make money as price action and the higher amount of buyers or sellers out-trumps fundamental opinions.

The next area of support is 1310.05. If that area fails to provide support look out below. For the bullish trend to continue key resistance (1420.94 Monthly & 1416.68 Weekly)will have to be defeated.


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