Gold Continues to Trace Out Possible Bearish Head and Shoulders Pattern
Commodities / Gold and Silver 2010 Nov 27, 2010 - 10:43 AMBy: Merv_Burak
Gold continues to act as one would expect when tracing out a bearish head and shoulder pattern. It’s not finished yet and may not but it does require careful attention over the next week or so.
It’s the U.S. Thanksgiving week-end and most people are in holiday mode. Having lived over a dozen years in the U.S. I’ll go along with that. This week is just the facts, little commentary.
LONG TERM
The long term P&F chart continues in a bullish mode. A drop to $1320, however, would break below two previous lows but would need a little more downside to break below the up trend line, which is at about the $1300 level requiring a move to $1285 to cause a bear signal.
As for the normal indicators, gold remains comfortably above its positive sloping long term moving average line. The long term momentum indicator remains in its positive zone although it is heading lower and is below its negative trigger line. The volume indicator continues to move in new high territory and remains above its positive trigger line. There is still little danger of any immediate reversal of the long term rating, which stays at BULLISH.
INTERMEDIATE TERM
The intermediate term is in more danger of reversing its trend. Gold closed above its positive moving average line but not by much. The momentum indicator remains in its positive zone but below its negative trigger line. The volume indicator is still the most positive being in new high territory and above its positive trigger line. The rating remains BULLISH but getting close to a downgrade soon. The short term moving average line confirms the bull but is closing the gap between it and the intermediate term average line and a few more negative days might just take it below the line.
SHORT TERM
The chart shows the continuing development of a possible head and shoulder reversal pattern. One should not immediately assume it will be confirmed as a head and shoulder, that would come on a move below the neckline. The action could just as easily firm up with all that’s going on in the world and move to new highs so wait for the break before declaring it a reversal. Note the continuing weakness in the short term momentum so it seems to be heading in the direction of a downside break.
Gold has once more closed below its short term moving average line with the line sloping to the down side. The momentum indicator is just a hair above its neutral line in the positive zone. It has dropped below its trigger line although the trigger is still in a positive slope. The volume indicator is below its 15 day average volume but that could be due to the holidays. All in all short term rating is BEARISH with the very short term moving average line confirming although it is almost ready to move above the short term line to nullify it confirmation.
As for the immediate direction of least resistance, I’ll go with the down side for the next day or two. The daily gold trading and Stochastic Oscillator seem to be heading in that direction.
SILVER
Although gold ended the week slightly on the up side not so for silver. It declined by 1.8%. It’s performance over various time periods still ranks it up there in the top 3 but it does look like the trend is weakening and just might reverse. The ratings remain the same as for gold although it is further from reversing in the intermediate term than gold.
PRECIOUS METAL STOCKS
Although the major North American Precious Metal Indices closed the week on the down side the Merv’s Indices were on the up side (except for the Qual-Gold Index which was down by 0.5%). The Indices are all still in bullish modes for the long and intermediate terms but on the short term things are in the process of going negative. The major North American Indices have already gone bearish while the Merv’s Indices are mixed. It is not the time to be jumping in as the risks are very large that a reversal of trend is ahead. Wait for your particular stock to be making new highs before thinking of further purchases. Just a though to protect capital.
Merv’s Precious Metals Indices Table
Well, that’s it for this week. Comments are always welcome and should be addressed to mervburak@gmail.com.
By Merv Burak, CMT
Hudson Aero/Systems Inc.
Technical Information Group
for Merv's Precious Metals Central
For DAILY Uranium stock commentary and WEEKLY Uranium market update check out my new Technically Uranium with Merv blog at http://techuranium.blogspot.com .
During the day Merv practices his engineering profession as a Consulting Aerospace Engineer. Once the sun goes down and night descends upon the earth Merv dons his other hat as a Chartered Market Technician ( CMT ) and tries to decipher what's going on in the securities markets. As an underground surveyor in the gold mines of Canada 's Northwest Territories in his youth, Merv has a soft spot for the gold industry and has developed several Gold Indices reflecting different aspects of the industry. As a basically lazy individual Merv's driving focus is to KEEP IT SIMPLE .
To find out more about Merv's various Gold Indices and component stocks, please visit http://preciousmetalscentral.com . There you will find samples of the Indices and their component stocks plus other publications of interest to gold investors.
Before you invest, Always check your market timing with a Qualified Professional Market Technician
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