Sunday, 23 June 2013

Two $1120 targets for gold on measured moves- and failures to re-take key levels.

Two $1120 targets for gold on measured moves.


Gold topped at $1920 at the beginning of September 2011 and had several corrective moves down to the $1520-1540 level over the next year or so. The price bounces inbetween these lows were also fairly consistent, three of the reaching very close to $1800, forming two alternative patterns. Firstly there is the rectangle range trading pattern between three lows at $1520-1540 and three highs at $1795-1800. Taking the extremes of those ranges, we have a trading range between $1520 to $1800, a width of $280. A breakdown from such a rectangle pattern might be expected to move lower by the width of the original trading range, which would take the price from $1520 to $1520-280 = $1240.

However, if you take the trading range as being from the top at $1920 to the lows at $1520 then the trading pattern was a descending bearish triangle, with a height of $1920-1520 = $400. A breakdown of this pattern might be expected to go $400 below $1520 all the way to $1120.


There is a second $1120 target based on recent price action. The ominous event that turned me bearish on gold was the early April failure to rally to retake the $1600 level after it was breached to the downside. The rally petered out at around $1600 and then there was a rollover, followed by a slightly lower minor high at $1589.40, just before the plunge down to the new intraday spike low of $1321 on Friday 12 and Monday 15 April split across the weekend. There was then a bounce into the 1400s and the formation of a bearish pennant which broke down and then crashed on Thursday 20 June in early morning hours.

The drop out of the pennant pattern occurred after almost identical price action to the April 12/15 crash. There was a failure to retake $1430 (the key high from November 2010) and a rollover, followed by a minor lower high at $1392.60, just before the plunge down to $1270 on 20 June.

The price formations are almost identical, see the charts. The first pattern saw a drop of $267.80 from $If they 589.40 to 1321.60. If the second pattern has similar consequences, the move would be from the minor high at $1392.60 to $1124.80, i.e. the line near the bottom of the chart.

I just noticed that on the daily candles chart I marked the high as $1195.80 but that does not change the target much! It would then be $1128.00.

A look at the 12/15 April plunge and implications for continuation of the 20/21 June crash.

I am looking to see whether the crash of 20 June is going to go further, down to the target of $1124.

Looking at the April 12/15 crash, the pattern is uninterrupted by the weekend, as if the weekend wasn’t even there! There are four small pullbacks or dead cat bounces, at $1480, $1440, $1400 and a slight one at $1360 on the way to $1321. Well, one every $40 then. Three are shown on the white chart and all of them on the black chart.

Those charts are 2 hour and 1 hour candles respectively, so the bounces lasted around 4 hours in each case.

Also, the US dollar did not move at all against the Swiss Franc or the Euro during the gold and silver crash. This is very unusual. The panic was in the gold camp only!


Now, what about the gold price action on 20-21 June 2013? Gold plunged down to $1280 or so and then we have seen a slight bounce to just over $1300 with the close for Friday at just under $1300. So this bounce has lasted from Thursday morning more or less to Friday night – more than 24 hours.

Panic selling has at least been interrupted this time and there has been a whole trading day of price recovery. That might imply that a bottom is in for this crash but will there be another one later?

This time, the US dollar Index USDX moved sharply up from 80.7 to 82.2, a move of +1.5, mostly in the small hours of the 20th of June, so the gold downmove was inverse to the dollar and also coincided with a fall in stocks.

Charles Nenner had a target on gold at $1280 weeks ago and he seems to have hit the mark almost exactly – but is this the final low? He sees a gold up-cycle beginning soon, though he has moved the date for the price bottom back a couple of times after apparently seeing this second crash coming. It would be interesting to see what his view is now.

Andrews Pitchfork shows current 20/21 decline was not a crash at all!

I looked at my GFT trading screen and noticed just today that the pitchfork that I drew on the gold chart on 21 June that the 1920 June decline is the same amount as the decline in late May from the bounce that occurred after the mid-April crash. The downward sloping pitchfork delineates the slope of the downtrend and a lot of the price action in it. The two blue circles lie on a parallel (lower red line)  to the pitchfork already in place and the upper red line of the trading channel is also parallel to the pitchfork. This structure encompasses trading at least back to February 2013.

The $1280 low could be the start of a tradable bounce to around $1350 but there is still a dangerous downtrend in play! There could then follow a further low to go with the blue circles that are at about $1335 and $1280 – the next visit to that parallel could be around $1225.

This chart pattern is absolutely still strongly in play after the bounce at $1280.

As yet, there is no sign of any kind of longer term upside reversal.
Failures to re-take key round number levels since September 2012:
Fairly dismal gold price action since last September! Unless you were short the market:


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