By Greg Holden – As I mentioned in an article yesterday, the price of Gold has been operating in long-term cycles of advance-and-retreat for the past year-and-a-half. While the overall trend is bullish for precious metals (Gold, Silver, and Platinum), there are periods of downturn in each. Looking at our chart below, it seems as if evidence is mounting for just such a movement.
Expecting a bearish correction is different than claiming a trend reversal. I am in no way disagreeing with other analysts whose claims place precious metals within a bullish channel. To the contrary, I agree with such claims, but would like to recognize the opportunities for short-term profits within the cyclical fluctuations of these instruments.
As we can see in the chart below, Gold has been moving with a rather distinctive pattern. Marked with a red line on the chart below, we can see the general direction of the overall trend of Gold. But notice that the price deviates away from this trend with sharper upturns. It’s as if the market is slamming its foot on the gas pedal and then hitting the brakes, over and over. I call this the “teenage drag-racer” formation.
But it goes beyond chart formations. We have a descending RSI, moments away from exiting the over-bought region. We also have a recent bearish cross on the Stochastic. Both indicators suggest bearishness. Also, if we follow our “teenage drag-racer” pattern, we can pick a great entry/exit point for traders.
Those going short on Gold may want to place their Limits near $1280. Those waiting for an entry point for another Buy position on the general uptrend should likewise aim for $1280 an ounce. If the bullish channel persists through the winter season, as it should, targets upward of $1500 an ounce may not be far off following this retracement.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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