Gold Weekly Chart – Technical Update Choppy Sideways Trading Range

by Olivier on April 1, 2014

Another quick chart update for gold with my thoughts. In my most recent Tischendorf Letter Interview I expanded on why I thought it was too early to be buying into the mining stocks. The miners have pulled back since. The technical picture for gold hasn’t improved either. Here are my most recent chart annotations:

  • 03/30/14 – REDREW. THIS IS STARTING TO LOOK MORE AND MORE LIKE A DESCENDING BEARISH TRIANGLE. IF THE LOWER BOUNDARY OF THE TRIANGLE DOESN’T HOLD, THE 1000 LEVEL WILL ACT AS A PRICE MAGNET. I AM NEUTRAL / BEARISH. BETWEEN 1200 – 1400 GOLD IS TRADING IN NO MAN’S LAND. DURING CHOPPY SIDEWAYS TRADING RANGES IT IS BEST TO PROTECT CAPITAL. WHEN THE TECHNICAL PICTURE IS UNCLEAR STAYING ON THE SIDELINES IS THE BEST OPTION.

Here’s the chart. Click to enlarge:

Granted, chart patterns morph and are constantly changing. As a trader one has to continually monitor the technical situation and adapt accordingly. That being said, the descending triangle could easily morph into a rectangle pattern. That wouldn’t change much though. This would still be a sideways trading range where explosive moves typically do not take place. Gold would have to convincingly break above 1400 on huge volume in order to alter the technical picture. Due to the fact the trend leading into the consolidation pattern was a downtrend, odds for the downtrend to resume when price moves out of the trading range are very high. Furthermore the 1000 $ level is undeniably a nice round number. These often tend to act as strong magnets attracting price.

Conclusion: I am not eager to short gold. But when in doubt one has to at least stay out. As stated in my annotations: When the technical picture is unclear standing aside is the most prudent option. After all, cash is a position.

Do not look to make any gains in bad markets. It is far better to stay out of bad markets where odds of wins are against us, rather than trying to swim against the tide. – Brad Koteshwar

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