The gold price (in dollars) is range bound right now and this is a build-up to a sharp move. The break-out can be in either direction. The relevant boundaries are shown.
Gold: Range bound for now.
Recommendation: Enter in new break-out direction.
Trend: Short term sideways. Medium term down. Long term sideways.
(Daily)
- Gold has been moving sideways in a symmetrical triangle (lines 1 and 2) over the past month. It can break out in either direction.
- The short-term stochastic oscillator (on top) is neutral, providing no real clues. The weekly stochastic oscillator (not shown) is oversold (potentially bullish).
- Enter in the break-out direction. Therefore, buy a close above line 2, or sell short a close below line 1. (That is, buy on a close above $1 305. For a break down, sell short on a close below $1 280.) Do which-ever happens first.
- For an upside break, the minimum target will be $1 348 – the height of triangle 1-2 projected up. For a break down the minimum target will be $1 237 (the triangle projected down).
- Taking a view of the bigger picture, the gold price needs to break above line 4 ($1 435) to end its bear trend of recent years.
* Colin Abrams is an independent technical analyst. To subscribe to more recommendations by the author or to attend his courses, go to www.themarket.co.za.